NZ ETS Settings Hold Steady Amid Shortfall Warning
The Climate Change Commission has recommended maintaining the current New Zealand Emissions Trading System (NZ ETS) settings but warns of a potential unit shortfall as early as 2028.
That’s according to Jo Hendy, chief executive of the Climate Change Commission, who says that urgent action is required to get on track for future climate goals.
Hendy says change is happening, with more renewable energy generation, process heat conversions, and electrification all of which is starting to show more in emissions data.
“The key now is to build on that momentum – the next steps are crucial for delivery,” Hendy says.
She says the role of the Commission is to give New Zealanders a clear, independent picture of how the country is tracking, regardless of who is in government.
“Going further is in the country’s best interests,” she sayd.
“There’s growing global evidence that countries investing in clean technology and renewable energy are not only cutting emissions, they’re also boosting productivity, creating jobs, building resilience, and unlocking long-term growth.”
According to the report, New Zealand is likely to meet its first emissions budget (2022-2025), partially because of accounting changes.
Yet the assessment also shows that while there is a possibility New Zealand will meet its second and third emissions budgets, the risks have increased.
Hendy says the Commission’s analysis shows that while things are broadly on track through to the end of 2025, the risk of veering off course after that has increased.
She says current policy settings are not enough to deliver the emissions reductions New Zealand has committed to.
“That’s why we’ve recommended specific next steps, because delivery will falter without them.
"Falling short doesn’t just mean missing a target - it means higher costs down the track, lost economic opportunities, and more disruption for communities. That’s what we’re trying to avoid."
To ensure the country is able to meet its future emissions targets, the Commission recommends the Government strengthen the structure of the New Zealand Emissions Trading Scheme (NZ ETS) and implement additional targeted policies.
"Cost matters, and many people have it tough right now," Hendy says. "That’s why the way we manage the transition is critical. New Zealanders care deeply about fairness and about securing a better future - and we can do both."
She says that there are smart opportunities in every sector, adding that it makes sense to use as many of them as possible to reduce emissions, spread risks, share benefits and build resilience.
"This approach also helps buffer against factors outside of the Government’s control. For example, a dry year could increase emissions from electricity generation, storms or wildfires could reduce the amount of carbon dioxide removed by forests, or international accounting rules could change."
Hendy says that one of the sectors with the biggest opportunities is agriculture.
“In agriculture, tailored advice and incentives can help farmers and growers adopt new tools and practices in ways that work for them – there’s no one-size-fits-all, and our competitive advantage depends on getting that right.”
"Ultimately, getting on track isn’t just about meeting climate goals," Hendy says. "It’s about reducing economic risks, strengthening our position in a rapidly changing world, and building a fairer and more resilient future for everyone."
