New Zealand Sees $2.9 Billion Cost to Use Carbon Credits for Climate Goal

New Zealand could need to pay as much as NZ$5 billion ($2.9 billion) if it purchases overseas carbon credits to help meet 2030 emissions-cutting targets under the Paris Agreement.

An analysis by the country’s treasury department modeled scenarios for the potential use of a United Nations-supervised carbon market, which allows a nation to account for reductions of some of its own emissions by funding activity to curb pollution overseas.

Meeting New Zealand’s target to lower net emissions by 50% of 2005 levels by 2030 could involve potential costs of between NZ$4.4 billion and NZ$5 billion, the treasury said in the document. It could cost a further NZ$1.6 billion to meet the upper end of a target for 2035, according to the study.

Nations including Singapore, Japan and Switzerland have struck deals to buy global credits under the UN arrangements, calculating that they are unlikely to hit international obligations on emissions reductions purely through domestic action to cut greenhouse gases. Projects generating the offsets, in locations including Thailand, the Maldives and Suriname, cover activities like forestry management and clean transport programs.

Initial transactions and credit transfers have given an indication of likely future prices, the treasury document said, forecasting a cost of NZ$54.40 a ton in 2027 rising to NZ$69.97 a ton in 2035.

New Zealand’s Prime Minister Christopher Luxon acknowledged the nation has a tough task to meet its 2030 climate target, though insisted his government wouldn’t allocate major funding to buy credits generated overseas.

“We’ve talked about the fact that it’s going to be difficult,” Luxon said Wednesday, at the Fieldays agricultural event near the North Island city of Hamilton. “We will do everything we can, but I want to reassure everybody we won’t be sending billions of dollars offshore.” New Zealand remains committed to hitting net zero by 2050, he said.

Luxon’s center-right coalition took office in late 2023 and has since removed some curbs on fossil fuels and loosened climate regulations for the country’s agriculture sector.

“Every time Christopher Luxon has cut climate action here at home, he has increased the bill we need to pay other countries to reduce their emissions,” Green Party co-leader Chlöe Swarbrick said. Any failure to meet the country’s 2030 targets could jeopardize trade agreements with the UK and European Union, which include climate commitments, she said.