New Zealand

New Zealand’s current policies are “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 limiting warming to 1.5°C. If all countries were to follow New Zealand’s approach, warming could reach over 3°C and up to 4°C.

New Zealand submitted its updated NDC in November 2021, but it will not achieve its NDC with currently implemented policies, and plans to make up the shortfall (around two thirds of the action required) through buying international offsets.

The CAT finds that following an emissions trajectory based on policy and actions, New Zealand will have emissions of 74 MtCO₂e in 2030 (excluding LULUCF), 14% higher than 1990 levels. The NDC target equates to 51 MTCO₂e in 2030 (excluding LULUCF), which is 21% lower 1990 levels.

CAT policies and action projections for New Zealand are based on government sources which project a dip in emissions in 2020 as a result of COVID-19 and a rebound in 2021 (Ministry for the Environment 2022f). This policies and action trajectory assumes New Zealand can sustain the low emissions resulting from the COVID-19 pandemic as the economy recovers.

In May 2022, the Government published the first three emissions budgets to cut its emissions by around 35% by 2035. The emissions budget until 2035 is around 835 MtCO₂e (in GWP AR5), 2.3% lower than the recommendation of the Climate Change Commission (CCC).

Non-government organisation Lawyers for Climate Change Action (LCANZI) has pointed out that the CCC’s carbon budget is not 1.5°C compatible. A November 2022 High Court judgment ruled that the Zero Carbon Act's references to limiting global warming to 1.5°C are merely "aspirational" and the Act does not impose a legally binding 1.5˚C obligation on the government (Daalder 2022). The Court also confirmed the CCC plays a critical role in driving New Zealand’s climate action, but that the advice provided by the CCC in setting up New Zealand’s NDC and first three emissions budget was not legally binding (New Zealand Government 2022c).

However, according to the CCC it remains unclear how the Government will ensure the NZ-ETS is fit to help deliver the outcome of prioritising gross emissions reductions. Without policy change, it is expected that NZ-ETS emissions prices will drive large-scale afforestation, displacing agriculture, and will delay reductions in gross emissions (Climate Change Commission 2022). According to one report, in 2021 50,000 hectares of NZ farmland was purchased for potential replanting with fast-growing pine for offsets (Limited and Orme 2022; Wannan 2022b).

In April 2022, the New Zealand government adopted its first emissions reduction plan (ERP) to 2050, reconfirming the government’s plans to reach net zero by 2050 and achieve a 24-47% reduction in biogenic methane by 2050.

It has put forward efforts to decarbonise key sectors such as transport and industry and has released an aligned budget. There are plans for fleshing out future initiatives to drive emission reductions in the energy and industry sectors by focusing on the following mechanisms: improved energy efficiency, fostering renewable energy, reducing reliance on fossil fuels, and accelerating emission reductions from industry.

In Budget 2022, New Zealand included major funding (NZD $2.9bn) to address climate change, funded through the proceeds from the ETS via the Climate Emergency Response Fund (Deloitte 2022; New Zealand Government 2022b).

The Budget topped up investment in the Government Investment in Decarbonising Industry (GIDI) by NZ $680m to accelerate industrial decarbonisation of process heat that makes up a third of New Zealand’s energy use. In transport, significant funding (NZD 1.3bn) is allocated to cycleways and public transport (NZ $350m), decarbonising buses and freight (NZ $60m) and supporting car share trials (NZ $20m)(New Zealand Ministry of Foreign Affairs and Trade 2022b).

A scrap-and-replace scheme, aimed at subsidising people into EVs is also committed ($569 million), which, despite facing strong political opposition, has now started to yield results as 2022 recorded second biggest EV sales (Stuff.co.nz 2023). Additionally, NZD 840m has been committed for international climate finance under the Paris Agreement, with half of this going to the Pacific and 50% to target adaptation.

New Zealand’s main instrument to reduce greenhouse gas emissions is an Emissions Trading Scheme (NZ-ETS) (Ministry for the Environment 2019). It relies on a market-based approach that ensures certain sectors report on, and are charged for, their emissions. It covers the following sectors: industrial processes, liquid fossil fuels, stationary energy, waste, horticulture, primary industries and industries involved in synthetic greenhouse gases.

Since June 2015, the NZ-ETS has transitioned into a domestic-only scheme, however recent moves indicate that the Government will reopen the NZ-ETS to international units to meet its 2030 emissions target, but it certainly aims to limit their use (Ministry for the Environment of New Zealand 2019).

The CCC published its recommendations to support the government decision on its updated NDC (Climate Change Commission 2021). The government subsequently released its Emissions Reduction Plan, published after public consultation in May 2022. The ERP includes three shrinking emissions budgets over three five-year periods to 2035, to support meeting the 2050 targets. However, the CCC’s emissions budgets do not meet the current NDC, let alone put emissions onto a 1.5˚C compatible pathway.

Subsequently, the Government passed a set of slightly stronger ERP emissions budgets than those recommended by the CCC, in parallel to ETS reforms. The ETS reform introduces a cap to limit the emissions covered by the ETS, which will decline in accordance with New Zealand’s carbon budgets based on the targets (Ministry for the Environment 2020c).

The revised ETS introduced the ability to auction New Zealand units (NZUs) from 2021, where bidders can bid for units. The proceeds from auctions were to be recycled for further emissions reduction in Budget 2022 (Shaw 2021b). In December 2022, the government increased the auction reserve price, the minimum price at which the NZUs can be sold to participants, to NZ$33.06/MtCO₂e from NZ$32.10/MtCO₂e (Ministry for the Environment 2022d). To regulate the price of units, the government set up a “cost containment reserve” (CCR) where it releases more units for sale to balance the prices if the price reaches NZ$50 (Ministry for the Environment 2020b). CCR trigger price was increased to NZ$80.64/MtCO₂e from NZ$70/MtCO₂e, significantly lower than the CCC's recommendation of a two-tier price structure of NZ$171/MtCO₂e and NZ$214/MtCO₂e (Goliy 2022).

Other amendments to the ETS include phasing out industrial allocations, LULUCF sector amendments, and details on the inclusion of the agriculture sector by 2025 (Ministry for the Environment 2020c). See specific sector analysis below for details.

In 2022, the government announced new settings for industrial allocations, admitting that over NZD 60m had been over-allocated to the country’s biggest emitters. From 2024, there would be no more new free allocations, with the current allocations being gradually phased out (RNZ News 2022). However, after public consultation the new bill before Parliament with the announced changes weakens them by increasing eligibility for new entrants, and increases the subsidy for big emitters (Newsroom 2022).

In July 2022, the Climate Change Commission issued its first review of the ETS, advising the government to change the way the ETS is set up, i.e. incentivising forestry and tree planting as offsets rather than cutting actual emissions, with Chairman Rod Carr warning that the ETS was more likely to deliver new plantation forestry than cutting emissions (Climate Change Commission 2022; Cardwell 2022). In November 2022, the government issued a new consultation around market governance of the ETS (Ministry for the Environment 2022e).

The government has now begun a public consultation around a National Environmental Standards for Plantation Forestry. It has also announced an update to the ETS that encourages permanent forests, which will begin in January 2023 (New Zealand Government 2022h).

The government launched the New Zealand Green Investment Finance Ltd (NZGIF) in 2018 (Scale-Up New Zealand 2019). The purpose of the institution is to catalyse investment in low-emissions initiatives. Investments so far have been directed towards distributed energy ($10m debt facility), energy efficiency ($3.8m in equity), transport ($5.8m hybrid investment and $15m green credit facility) (NZGIF 2021).

In November 2022, the government issued its first Green Bonds to raise funds for climate change expenditure (New Zealand Government 2022f).

New Zealand's planning laws were a major impediment in preventing high-emitting projects, such as the newly constructed gas-fired power stations in Taranaki. A 2004 amendment to the Resource Management Act inserted clauses stating that a regional council "when making a rule to control the discharge into air of greenhouse gases...must not have regard to the effects of such a discharge on climate change."

The same laws applied to the nation's exclusive economic zone legislation. The government repealed this clause under the Zero Carbon Act, and this amendment was due to come into force at the end of 2021, allowing regional councils - who grant most of the consents for high-emitting projects - to first establish policy statements (Parliamentary Counsel Office 2020). The delay to this repeal was extended and came into force on 30 November 2022. The government is now drawing up a national environmental standard on climate change, and a national policy statement on greenhouse gas emissions from industrial process heat, which will be released for public consultation and finalised in the first half of 2023.

In August 2022, the government released New Zealand’s first National Adaptation Plan based on the 2020 National Climate Change Risk Assessment, setting out broad objectives for the country to adapt to the climate impacts already being experienced across the country (Ministry for the Environment 2022b). The plan maps out a plan of action to address risks, and will provide new policies and legislation, and embed adaptation into policies and approaches across government.

In Glasgow, a number of sectoral initiatives were launched to accelerate climate action. At most, these initiatives may close the 2030 emissions gap by around 9% - or 2.2 GtCO₂e, though assessing what is new and what is already covered by existing NDC targets is challenging.

For methane, signatories agreed to cut emissions in all sectors by 30% globally over the next decade. The coal exit initiative seeks to transition away from unabated coal power by the 2030s or 2040s and to cease building new coal plants. Signatories of the 100% EVs declaration agreed that 100% of new car and van sales in 2040 should be electric vehicles, 2035 for leading markets. On forests, leaders agreed “to halt and reverse forest loss and land degradation by 2030”. The Beyond Oil & Gas Alliance (BOGA) seeks to facilitate a managed phase out of oil and gas production.

NDCs should be updated to include these sectoral initiatives, if they aren’t already covered by existing NDC targets. As with all targets, implementation of the necessary policies and measures is critical to ensuring that these sectoral objectives are actually achieved.

• Methane pledge: New Zealand was one of the signatories of Global Methane Pledge during COP26 and committed to reduce methane emissions by 30% globally by 2030 compared to the base year of 2020. The share of methane in New Zealand’s total emissions is significant, at around 43.5%, but absolute methane emissions have remained the same since 1990. Around 89% of New Zealand’s methane emissions come from the agriculture sector.
• Coal exit: During COP26 New Zealand joined a coalition of 190 countries that pledge to phase out coal-fired power generation and stop construction of new plants.
• 100% EVs: New Zealand is one of the signatory of COP26 declaration on accelerating the transition to 100% zero emission. New Zealand government has an electric vehicle target for government fleet vehicles to be carbon neutral by 2025/26 (with agencies having to buy offsets for their remaining petrol-driven cars), and has introduced the country’s first-ever CO₂ emissions standard for imported cars in 2021.
• Forestry: New Zealand signed the Leaders' declaration on forest and land use at COP26. As of 2021 New Zealand’s sink capacity is 22 MtCO₂e/year.
• Beyond oil and gas: New Zealand is an Associate Member of this alliance, which was created with the aim to restrict any kind of fossil fuel expansion by ending licensing of new projects and phasing out existing oil and gas projects.
  As an Associate Member of BOGA, New Zealand commits to implementing domestic subsidy reform on oil and gas, to end the subsidies, end public financing of oil and gas domestically and outside its border, along with developing short and long term measures to reduce the supply of oil and gas in the global market. The domestic production of oil and gas in New Zealand is insignificant but the government has already banned new oil and gas exploration permits. In the ERP, New Zealand has included a plan for a just transition from gas.

In 2020, energy related emissions made up 40% of total emissions (excl. LULUCF). New Zealand has set a target that 50% of total energy consumption will come from renewable sources by 2035 and has an aspirational target of 100% renewable electricity by 2030 (Government of New Zealand 2016; Ministry of Business Innovation & Employment 2021b). The Ministry of Business, Innovation and Employment is currently developing an energy strategy for New Zealand which is expected to be released by the end of 2024. The first ERP set the policy direction for reducing emissions from energy.

New Zealand’s electricity generation is a mix of renewables, coal, oil and gas, where hydro power meets a high proportion of demand (Ministry for the Environment 2020a). Fossil fuels accounted for just 16% of electricity generation in 2018 (Ministry for the Environment 2020a). Thermal baseload electricity generation is moving to a mix of wind, geothermal, and gas peaking plants, while a number of baseload electricity generation plants are set to be decommissioned (Ministry for the Environment 2019).

The decommissioning of the Stratford Combined Gas Cycle Turbine (380 MW) is expected in 2023, Whirinaki Diesel Peaker (155 MW) in 2024, and Huntly Coal Power station (400 MW) in 2030/31 (Ministry for the Environment 2019). New Zealand is part of the Powering Past Coal alliance and committed to no further coal for unabated electricity generation by 2030 (Climate Change Commission 2021).

In its first ERP the New Zealand Government indicated a tentative timeline for the development of gas transition plan over 2023-24, aiming to outline a fossil gas transitional pathway and thereby reduce reliance on fossil gas, while still providing for some fossil gas use in 2035 (Ministry of Business 2022b).

In 2018, renewable sources made up 83.3% of electricity generation, a level that has been high in New Zealand for decades, due to its extensive historical hydro generation, along with more recent wind and geothermal plants (International Energy Agency 2019). Reliance on hydro power creates vulnerabilities in the electricity system as it is subject to rainfall.

New Zealand experienced a dry year in 2019, where wind power could not compensate for the decrease in hydro power, and gas and coal were ramped up to meet the shortfall (Ministry of Business Innovation & Employment 2020). In 2020, Genesis Energy imported more than 1.8 million tonnes of sub-bituminous coal from Indonesia to burn at the Huntly coal-fired power station, a ‘record year’ more than any other year and in the midst of a government-declared climate emergency (Bond 2021). Import volumes remain high in 2022, and almost half a million tonnes was imported in June 2022. New Zealand also exported significant amounts of bituminous coal over the same period (Ministry of Business 2022a).

One option being explored by the government to deal with the issue is pumped hydro storage at Lake Onslow (Ministry of Business Innovation & Employment 2021a) which would provide fast response for power system flexibility, intermittency back up allowing for more solar and wind, and dry year storage. Accelerating uptake and diversifying renewable energy along with energy efficiency will be key to decarbonising the sector (Climate Analytics 2021). Final decisions on this project have not yet been made, and coal continues to provide backup.

The Climate Analytics 1.5C National Pathway Explorer found that a 1.5°C compatible pathway requires New Zealand to be near 100% renewable power by 2030 and to phase out coal in the current decade and natural gas by 2032 to 2035 at the latest (Climate Analytics 2021). Similarly, the CCC recommends a target of 95% to 98% renewable electricity by 2030 to replace the current target of 100% by 2035 (Climate Change Commission 2021). It also recommends that coal be phased out of power generation as soon as possible and that this occurs under the principles of a Just Transition (Climate Change Commission 2021).

The CCC has recommended that the government draw up a national energy strategy to establish a coordinated approach to support low emissions technologies, and considering emissions reductions and removals; system reliability and affordability; future energy developments; infrastructure; equitable industry transitions; regional and national economic development planning; supply chains; and workforce and skill needs (Climate Change Commission 2021). The CCC recommends a target of 50% of energy consumption to be renewable energy by 2035 including power, process and building heat and transport (Climate Change Commission 2021).

In November 2018, the government banned new offshore oil and gas exploration (Government of New Zealand 2018). Onshore, the construction of the 100 MW natural gas fired power plant in Taranaki has now been completed and the plant began operations in May 2020 - to be used as backup for peak periods and provide baseload when wind or hydro generation is low (Keith 2020). Further, Beach Energy has provided plans for fully developing the Kupe gas field and provide 10-15% of New Zealand’s annual gas demand and 50% of its LNG demand to the EPA, with two development wells to commence construction in late 2022 through to 2023 (Offshore Energy 2022).

The government is supportive of developing a hydrogen economy (Persico 2019). Hydrogen can assist in decarbonisation in a number of ways, particularly with respect to the industry sector and heavy freight transport. However, it is important to distinguish between hydrogen produced from renewable energy and hydrogen produced from fossil fuels. Fossil fuel hydrogen causes a substantial amount of emissions and is thus incompatible with a 1.5°C world.

The government released a hydrogen vision paper for consultation in 2019 to inform a national hydrogen strategy (New Zealand Government 2019b). The vision paper suggests that hydrogen produced from fossil fuels may help in a hydrogen transition, but the government finds that there is greater opportunity for green hydrogen for domestic use and export, in line with the net-zero goal (New Zealand Government 2019b).

A hydrogen roadmap is currently being developed to provide a blueprint for the development of a hydrogen industry in New Zealand and help inform foreign and domestic investment in New Zealand (Ministry of Business Innovation & Employment 2022). The government is collaborating with countries like Japan and Germany to support research and development of hydrogen technology and has joined new hydrogen initiative under the Clean Energy Ministerial portfolio.

Industrial processes and product use (mainly iron, steel and aluminium production) are responsible for around 6% of New Zealand’s total emissions excluding LULUCF, but these were recently revised upwards due to the reallocation of emissions from the New Zealand GHG Inventory published in April 2022 (New Zealand Government 2022a).

The main GHGs directly emitted by industry are CO₂ (two thirds of emissions), followed by hydrofluorocarbons (HFCs). Following the ratification of the Kigali Amendment in October 2019, New Zealand will begin phasing down HFCs in 2020 and cut usage by 85% by 2036 (New Zealand Government 2019a; Parliamentary Counsel Office 2019).

In the ERP, improvement of industrial energy efficiency has been put forward as an important strategy to reduce emissions from industries. In its Action 11.1.2, it outlines the NZ$220 million State Sector Decarbonisation Fund to replace the largest, most-used fossil fuel boilers with low-emissions alternatives (New Zealand Government 2022a). It also has a plan to support industry to improve energy efficiency, reduce costs and switch from fossil fuels to low-emissions alternatives.

The government has a target to reduce industrial emissions by at least 1% a year between 2017 and 2022, with a particular focus on process heat. Based on the latest historical industry data, industry emissions increased 1% from 2017 to 2018, and dropped 1% between 2018 and 2019 (Ministry for the Environment 2021b).

New Zealand prohibited new coal boilers in manufacturing and production by 31 December 2021 (Woods, Parker, and Shaw 2021). The government has also banned new low and medium temperature fossil fuel boilers, and the phase out of existing coal boilers by 2037, following CCC advice (New Zealand Government 2022j).

The Government Investment in Decarbonising Industry Fund (GIDI) is a government – business collaborative effort to lower emissions in the industry sector as part of COVID 19 recovery (EECA 2021). Since November 2020, three rounds of projects have been announced covering 53 projects, including $69m for co-investment grants over three years, and a crowd-in total of $117 million of private funding for abatement projects.

Dairy and coal industries lobbied the government during COVID-19 to exempt the coal production industry from lockdown, and coal production for domestic use was allowed to continue as it was deemed necessary for food production (Frykberg 2020). The dairy industry, New Zealand’s largest exporter, uses a large portion of coal consumption to dry milk powder, accounting for 71% of industrial use, and 25% of total coal consumption in New Zealand, coming in second only to electricity generation (27%) in 2019 (Ministry of Business Innovation & Employment. 2019). The country’s largest dairy company, Fonterra, one of the biggest coal users, has now committed to phasing out coal boilers by 2037, the same date recommended by the Climate Change Commission (Piddock 2021).

Transport is the second largest source of emissions (excluding LULUCF) in New Zealand (Ministry for the Environment 2021b). Transport emissions are the result of heavy reliance on fossil fuels, poor fuel economy of cars, road freight reliance, low density living, and transport planning based on car use (Ministry of Transport 2021).

Light vehicles are responsible for the highest share of transport emissions at 67%, and 23% is from heavy vehicles (Ministry of Transport 2021). New Zealand has the fifth highest CO₂ road transport emissions per capita out of the OECD countries (Ministry of Transport 2021). New Zealand also has one of the oldest car fleets in the world.

In 2020 decreased transport emissions led to a fall in total emissions by 3.5% from 2019, which is projected to a slow decline from 2024 onwards assuming increasing EV uptake (Ministry for the Environment 2021c; Ministry of Transport 2021).

Current transport policies include road user charge exemptions for low emissions vehicles, increased investment in walking, cycling, public transport, and rail freight (Ministry of Transport 2021). In 2021, the government introduced exhaust emissions standards for new and used vehicles entering the fleet depending on fuel type and vehicle weight (NZTA 2021).

However, this was delayed and, after discussions with industry, on 1 November 2022 the Clean Vehicle Standard 2022 Regulations came into force, and later that month the government confirmed the clean car emissions standard would be applicable to imports from 1 December 2022, and more widely from 1 January 2023 (Ministry of Transport 2022).

The New Zealand Government has a goal for a carbon neutral fleet by 2025/26 for light vehicle (New Zealand Government 2021c; Beehive.govt.nz 2021), with agencies having to buy offsets for their remaining petrol-fuelled vehicles. However, in January 2023, the government announced a continuance of the cut in excise duty on fossil fuel, which was introduced as temporary measure in 2022 to deal with inflation (RNZ News 2023).

The 2022 budget allocated NZD 569 million towards a vehicle scrap and replace scheme for low income households and a shift towards electric vehicles. However, the plan has been criticised as yielding low emissions impact for a high investment, based on the high price of EVs and inability for many low income households to make up the subsidy gap to purchase EVs. Another NZD 375 million has been extended for modal shift and infrastructure development for active travel (New Zealand Government 2022k).

The decarbonisation of the heavy vehicle fleet is supported by the following initiatives: NZD 41 million investment to support the decarbonisation of public transport through supporting Public Transport Authorities to deploy low and zero-emissions buses and NZD 20m funding to support innovations in the decarbonisation of freight through low emission freight technologies, fuels, services, infrastructure, innovations and business models (New Zealand Government 2022k).

There are funds allocated for the upkeep of the rail transport network (New Zealand Government 2021d). The Government’s ‘electric vehicle first’ policy received $42 million for the leasing of low emissions vehicles across the public sector (Shaw 2021a). However, much of the national rail transport network has been closed down.

In 2016, the previous government announced an Electric Vehicles Programme aimed to encourage the uptake of electric vehicles (EVs), 64,000 EVs registered in New Zealand by the end of 2021 (Government of New Zealand 2016). However, this was later dropped by the incoming Labour Government, and replaced by a target for all new government vehicles to be carbon netural after 2025 (Stuff 2019; New Zealand Government 2021b), with agencies required to buy offsets for petrol-driven vehicle emissions after that time.

In February 2022, the Clean Vehicles Act, 2022 came into force, bringing with it a range of changes for EVs and emissions charges (Ministry of Transport 2022). It extended the Clean Car Discount Scheme from 2021. New rebates to encourage the public to buy electric vehicles was introduced from April 2022, giving an NZD 7500 rebate for zero emission cars, NZD 5000 for hybrid cars (up to 56g CO₂ per km) and less for cars emitting 56-146g CO₂/km (Waka Kotahi NZ Transport Agency 2021). The scheme has been extended indefinitely. The policy also included a tax on larger combustion engine vehicles with high emissions.

By the end of 2022 registered electrified SUV sales were up by 3.8% compared to 2021 (Scoop News 2023). To reach decarbonisation of the road transportation sector globally, the last combustion engine vehicle must be sold before 2035 (New Zealand Government 2022d).

The agriculture sector represents around half of the country’s emissions (excl. LULUCF). New Zealand is in the process of developing a set of policies to reduce emissions from agriculture. The government has released a draft policy based on a report developed in consultation with the agriculture sector - He Waka Eke Noa - to reduce emissions from this sector. The government claims its modelling results show this policy would be instrumental in achieving the methane reduction target (New Zealand Government 2022i).

Under the proposed plan, by 2025, a farm-level emissions pricing system will be introduced. Farmers who exceed the threshold for herd stock and fertiliser use, will be required to pay a levy that the government will set every one to three years, on advice from the Climate Change Commission and farmers (New Zealand Government 2022j). However, farmers would pay only 5% of these fees set under ETS – a 95% discount.

A separate levy price will be set for long-lived gases and biogenic methane (New Zealand Government 2022j). This policy will also extend financial support to the farmers for the adoption of technology to curb the emissions from cattle. However, this plan has been criticised for not accounting for on-farm forestry and related offsets, and relying heavily on trust and industry partnerships (Craymer 2022).

Revenue from the levies would be recycled back into the agricultural sector with incentive payments to farmers and to support new technology. The proposal was opened for public consultation until 18 November 2022 and final policy announcements are expected.

According to the ERP a new Centre for Climate Action on Agricultural Emissions will be established to drive a step change in mitigation technology innovation and uptake on farms, with a first tranche Agricultural budget allocation of NZ$ 380 million (New Zealand Government 2022k).

Policies and action projections indicate agriculture emissions will decline by 2 MtCO2e from 2021 to 2030 (Ministry for the Environment 2022f). The government suggests emissions will decline due to several reasons: a decline in agricultural land use, particularly dairy cow, beef, and sheep populations; the One Billion Trees program and changes to the ETS which support afforestation; changes to farm management practices and the National Policy Statement for Freshwater Management.

In Budget 2022, a number of initiatives targeted at economic opportunities in the forestry sector, including $145 million for carbon sink development using new afforestation techniques, $111 million for improving sequestration and $91 million for stimulating greater production of woody biomass (New Zealand Government 2022b).

New Zealand has traditionally relied on the sinks from forests planted in the 1990s rather than effective climate policy, and the carbon removal benefits of the forests are diminishing (Climate Change Commission 2021). The LULUCF sector has historically represented a big carbon sink that offset, on average, 40% of gross GHG emissions between 1990–2017 (average -29 MtCO₂e yearly). New Zealand’s reliance on LULUCF to meet its NDC target decreased from to 26% from 35% since last year. Emission reductions from emissions-intensive sectors should be a focus, rather than reliance on the uncertain LULUCF sector.

New Zealand’s “Kyoto forests”—largely exotic pine plantations planted in the early 1990s—are due to be harvested in the next few years. The platform Global Forest Watch evaluated a loss in tree cover of 1,290kha from 2001 to 2020, equivalent to a 11% decrease in tree cover since 2000, whereas tree coverage gain over the same period was 710kha (Global Forest Watch 2021). However, recent reports state that more than 175,000 ha of whole farms have been sold for afforestation since 2017 with the country recently opening for offshore investors (12,000 ha sold in 2022) (Stuff.co.nz 2022a).

Scenarios modelled by the New Zealand Institute for Economic Research require the LULUCF sector to increase the carbon sink to 50 MtCO₂e by 2050 in the zero net emissions scenario (New Zealand Institute of Economic Research 2018).

New Zealand has 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 has been criticised by LCANZI which finds that masking real emissions defies the Zero Carbon Amendment Act, which it argues would require a standard land based accounting approach (LCANZI 2021).

New Zealand uses a “modified activity-based” accounting method for the NZ ETS and NDC. Rather than recording emissions and removals as they occur, this method averages out the removals and emissions from plantation forests by disregarding emissions that will be outweighed by removals as forests are harvested.

Using this method can be misleading. For example, the proposed emissions budget for New Zealand by the CCC uses the “modified activity-based” method and presents net emission figures for the past three decades as much higher than compared to figures when recording emissions and removals as they occur, although the overall historical net emissions do not change (LCANZI 2021).

This accounting method has implications for the NZ ETS, the NDC and emissions budgets’ compatibility with the global 1.5°C goal.

The NZ ETS reforms introduced average accounting, allowing some exemptions for adverse events such as fires, allowing forests to offset deforestation by planting elsewhere, and delaying some forestry changes (Ministry for the Environment 2020c). The ETS allows foresters the option of using averaging to receive carbon credits for sequestration until they reach average carbon storage over the plantation harvest cycle, which raises questions around the certainty of the accounting methodology introduced, especially when the levels of removals will be central to New Zealand’s strategy in reaching the net-zero target in 2050. The other option available is to receive more credits as the forest grows and pay credits back after the harvest.

The Government has a policy to plant one billion trees by 2030 (Ministry for the Environment 2019). The Government has so far reported having planted close to 480 million Trees as of September 2022 since the programme started, with 88% comprised of exotic species (NZ Government 2022; Stuff.co.nz 2022b). However, the programme also identified the difficulties of providing the appropriate incentives to achieve a sustainable and substantial increase in afforestation activities. Funding applications have now been closed.