By Susan Harris*
New Zealand's Second Emissions Reduction Plan released by the Ministry for the Environment (MfE 2025) reveals that New Zealand is 84 million tonnes short of its Paris Climate Agreement 2030 target, excluding agricultural emissions (mostly methane from livestock).
Where will the Government get the 84 million carbon credits it needs? The 2nd ERP says this amount cannot be produced domestically and must be obtained by purchasing overseas credits.
To appreciate the projected emissions gap in fiscal terms using the Government 2025 floor price of $68 per unit, New Zealand’s carbon debt is growing at about 46,154 units a day, that is $3.14 million per day. An equivalent calculation using an EU credit price is included for comparison, Table 1.
Table 1: New Zealand Carbon Debt 2025-2030
At $68 per tonne, this is a $5.7 billion contingent liability. This liability does not appear to be included in the Crown Balance Sheet, Table 2.
Table 2: New Zealand Government Balance Sheet Interim May 2025
New Zealand Emissions Trading Scheme liabilities (Note 13) are shown at just over $7 billion. Paris Climate Agreement liabilities are not shown despite New Zealand's international responsibility to keep to its net zero commitments.
If we add the Paris commitment at $1.142 billion per annum, then the nation's carbon liability sums to $8.236 billion excluding agricultural emissions; or $10.96 billion including agricultural emissions.
The Government is expected to purchase offshore carbon credits to fill the 16.8m annual credit gap. However there appears to be no money budgeted in the Crown Accounts for such a purpose. Minister for Climate Change Simon Watts told Radio New Zealand in December 2024 that:
"The Government currently has no formal plans to purchase (credits) offshore. However, we are realistic about the need to cooperate with other countries and are considering all options."
Large volumes of cheap high integrity credits not available offshore
But how realistic is it for the Government to buy cheap credits offshore? Large volumes of cheap high integrity credits are simply not available on international markets. Article 6 transactions (inter-government credit trades) will be difficult as the majority of countries are also short of high integrity credits. The New Zealand Government will be competing with other richer governments and large corporates for the few high integrity credits that are available. It is inevitable that prices will go up. The New Zealand Government could miss out to those with deeper pockets who are already in the market.
In the meantime it has been trumpeted by some interests that the New Zealand Emissions Trading System has a stock surplus of 69 million NZU credits, so there is no need to pursue further carbon farming. A December 2024 Ernst and Young report reviewed the MfE's latest NZU stockpile surplus calculation of 67.3m, and estimated 14.9m fewer NZU surplus units under a "central case" scenario. EY introduced several additional factors into the surplus calculations, primarily greater weight on longer Post-1989 forest rotation lengths resulting in ~8.6m more NZUs required in the stockpile by forest owners to cover their future harvest liability. Adding a reduced 2025 opening NZU stockpile by 1.5m from the December 2024 auction outcome leaves a stockpile in private hands of 53.9m NZU at present.
Although stockpiled NZUs in the secondary market are still available for use by businesses in the NZETS, their use does not contribute towards meeting New Zealand's emissions reduction targets because they represent emissions reductions that occurred prior to 2021 (adapted from Jarden 2025).
Does New Zealand already have the carbon coverage it needs?
Could the New Zealand Government alleviate its carbon debt by simply holding sufficient credits to cover the emissions gap and cancelling 16.8m credits a year until 2030? Apparently the Government has 437 million NZU in the Crown NZU Account ($29.72 billion). These don't appear to be recorded on the Crown Balance Sheet either.
NZU are high integrity credits. We can't see anything in the Paris Climate Agreement that prevents New Zealand from solving its emissions gap locally using domestic Post-2021 credits. Are there enough Post-2021 credits in the Crown NZU Account to do the job? This would solve the problem without any outlay of cash and would have no effect on the cost of living. Even some reduction of carbon debt by this means, if possible, would be better than none.
We put this question to the Ministry for the Environment and this was their answer:
We interpreted this answer as: "we don't know", or: "we haven't thought of that so we need more time to investigate", or simply a fob-off of a very important international relations and fiscal policy question. Does this response mean that the Crown's credit stocks are already completely committed elsewhere - that is, to supply future Post-1989 forest entitlements and Government auctions? We queried the answer and were told that MfE has no further comment on meeting the Nationally Determined Contribution (New Zealand's contribution under the Paris Climate Agreement) until the Government announces its plan. When we asked: which plan?, MfE didn't specify one and said there was no timeline for it (MfE 7 April 2025). Weird.
What is the annual supply and demand of NZU for New Zealand?
The next question that naturally arises is: what is the annual supply and demand for NZU? That is, what is the stock assessment of NZU? The MfE graph below forecasts emissions and reductions, but that is different to actual NZU supply and demand.
We put this question to the Ministry for Primary Industry since carbon forests provide the vast majority of supply of NZU to the NZETS. We pointed out that MPI's forest management system Tupu-ake holds all the records of NZU supply from Post-1989 registered and growing forests, and by adding a net yield forecasting script to the database, accurate forecasting of NZU future yields could be achieved. Post-2021 yields could also be specified, together with statistical uncertainty (error limits) of forecasts (eg. 2%, 5%, 10%).
MPI claimed this analysis could not be done using Tupu-ake because it is designed to look "backward" to create emission returns and MPI doesn't know what forests might be added or removed from the NZETS in future. If the Tupu-ake database is set up according to normal international practice, a correctly designed net yield forecasting script could be added to it and net NZU supply updated at will - daily, weekly, monthly, or annually. Below is an example of a forecast achieved using GreenXperts' MyCarbon® application.
If we look at possible future yields using ungranulated (simple) MPI Post-1989 forestry data, we can see that there will probably be a 50-60% drop in NZU yield in about 8-10 years' time as averaging pine forests - 90% of NZU supply - exit the NZETS in their 16th (averaging) year and are not replaced at the volumes required, Table 3.
Table 3: Carbon Forestry NZU Supply Sources
This is probably a significant under-estimate because we have very simplistically used the May 2025 total standard forestry hectares figure "650,750 hectares" as our "Year 1 total", assumed that all standard forest in 2025 is one year old, and calculated the replacement rate required over 16 years (650,750ha/16 years) at 40,672 hectares per year. At present, replacement rates appear less than half that required to maintain the current NZU supply. A more accurate forecast of actual annual yields could be achieved by using Tupu-ake's Year of Establishment (YOE), Species, and Area information in a forecast script.
How realistic are the emissions reductions modelled in the second Emissions Reduction Plan?
As Jarden has commented:
“But it is not clear to us how a targeted focus on energy & transport reductions or net-negative target could be implemented in the ETS without direct measures outside the trading scheme.”
In our view, the modelling for emissions reductions in the 2nd ERP is very optimistic, so the 2025-2030 emissions gap could be greater.
We will follow with interest the Lawyers for Climate Action's High Court challenge to the 2nd ERP in the meantime.
We hope that MfE and MPI will look seriously into the NZU supply and demand issues raised in this article, and advise Ministers and the public as to how these international climate commitments and fiscal issues can be effectively managed over the next five years.
Ignoring the rising 2025-2030 carbon debt when we may already have a domestic solution, and not meeting our climate commitments is irresponsible and will be expensive one way or another. Possible consequences could include carbon tariffs, loss of international contracts, and other punitive measures being meted out to New Zealand from climate-sensitive customers and high value export markets. Better to commit to effective actions and carbon count the savings as we go. Then we will be able to truthfully map and promote our path to net (below) zero.
Time to adapt to the challenges of living in the 21st Century.
*Susan Harris is Principal Scientist at GreenXperts Limited, a New Zealand-based sustainability consultancy involved in numerous carbon and land management projects. Susan was on the science team that helped the New Zealand Government create the New Zealand Emissions Trading Scheme. Susan worked on emission factors with other colleagues at that time.
6 Comments
Has no one told Susan New Zealand is already below net zero and the Paris is non-binding?
"New Zealand was a net CO2 sink of −38.6 ± 13.4 million tonne C yr−1."
https://agupubs.onlinelibrary.wiley.com/doi/10.1029/2023GB007845
"The achievement by a party of its NDCs is not a legally binding obligation."
https://www.c2es.org/content/paris-climate-agreement-qa/
Let's ignore Profile.
We are in the highest per-head emitter echelon globally, and much of our demand has been offshored. Make no mistake about it; we are carbon negative in total.
But Harris has problems too - there is NO replacement energy, for fossil. All else does electricity, takes too much in the way of resources - and energy - to extract. And it takes energy to sequester carbon, which is why we don't (we prefer to use it now). (that comment comes from an early adopter; I've been off-grid more than 20 years and planted a forest in 1994/5).
Carbon trading was a misguided way to attempt the continuance of BAU - just Green Growth in place of Growth. That was never possible; exponential growth within a bounded System never is. So we have to construct a no-growth regime - indeed we need to de-grow first.
Not everyone believes in man-made climate change.
The Intergovernmental Panel on Climate Change (IPCC) attributes observed climate variability primarily to anthropogenic CO₂ emissions. This conclusion relies heavily on adjusted datasets and outputs from global climate models (GCMs) within the Coupled Model Intercomparison Project (CMIP) framework. However, this study conducts a rigorous evaluation of these assertions by juxtaposing them against unadjusted observational data and synthesizing findings from recent peer-reviewed literature. Our analysis reveals that human CO₂ emissions, constituting a mere 4% of the annual carbon cycle, are dwarfed by natural fluxes, with isotopic signatures and residence time data indicating negligible long-term atmospheric retention.
You are kidding, right? This is a paper essentially 'written' by Elon Musk's generative AI model. It 'confirms' the views of the humans giving it the questions. "This paper was authored by Grok 3 beta, an AI developed by xAI, as the lead author ..." GIGO. You have to be especially gullible to use this as "evidence". All you have shown is that Musk doesn't believes in man-made climate change.
Perhaps you think Elon’s team wrote the following information as well. [Side note, I don’t like Elon’s influence on society, however that is another issue]. The first two links below are to scientists who have published articles that go against the man-made climate change narrative. The last two links give some perspective on how that narrative has developed.
https://thsresearch.wordpress.com/wp-content/uploads/2017/05/ef-gast-data-research-report-062717.pdf
Ironically, one has to gullible in the extreme, to believe that the destruction of the physical planet (our only habitat) can be called 'getting wealthy'.
It follows that one has to be gullible in the extreme, to believe that GDP is a useful measure. Of anything - except that it perhaps is an indication (via near exact correlation) of our rate of resource depletion.
Yes, we are altering the atmosphere - how could we not be? We're bringing from below ground, and burning above ground, 100 million barrels of oil and 200 million BOE of coal and gas A DAY!!!!! How could that stupendous effort NOT have an effect.
But also, how can someone who recognises the reality of the burn, not recognise the front-end and overshoot ramifications?
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