Climate & Policy — Energy Pulse NZ

Emissions Profile

Where NZ's greenhouse gas emissions come from

~78

Gross emissions

Mt CO₂-e (2024)

53%

From agriculture

Mainly methane

~40%

From energy

Transport, heat, electricity

0.17%

Of global emissions

But high per capita

Emissions by Sector

53%

Agriculture

21%

Transport

15%

Industry & Heat

7%

Electricity

4%

Waste & Other

NZ's unique profile: Unlike most developed nations, over half of NZ's emissions come from agriculture (methane from livestock, nitrous oxide from fertilisers). This makes decarbonisation politically complex — the ETS doesn't yet cover farm emissions directly.

By Greenhouse Gas

Carbon dioxide (CO₂)	~42%	Fossil fuels, industry
Methane (CH₄)	~43%	Livestock, waste
Nitrous oxide (N₂O)	~12%	Agriculture, fertilisers
F-gases	~3%	Refrigeration, industry

Trends Since 1990

Gross emissions up ~14% since 1990
Agriculture stable — livestock numbers declining but intensity up
Transport up significantly — more vehicles, more driving
Electricity down — more renewables, less gas/coal
Forestry offsets — net emissions lower due to carbon sinks

Sources: Ministry for the Environment GHG Inventory 2024, Stats NZ, Climate Action Tracker

Targets & Emissions Budgets

The legislative framework under the Zero Carbon Act

2050

Net Zero Target

All gases except biogenic methane

-50%

2030 NDC

vs. 2005 levels (net)

14-24%

Methane target

Reduction by 2050 (revised)

3

Emissions budgets

Through 2035

Emissions Budgets

Budget Period	Budget (Mt CO₂-e)	Status	Reduction Plan
EB1: 2022-2025	290	✓ On track	ERP1 (May 2022)
EB2: 2026-2030	305	⚠ Moderate risk	ERP2 (Dec 2024)
EB3: 2031-2035	240	⚠ Significant risk	ERP3 (due 2029)

2050 target at risk: According to the Climate Change Commission's 2025 monitoring report, current policies are insufficient to meet the third emissions budget or the 2050 net zero target. Further action is required before the next emissions reduction plan.

The Zero Carbon Act (2019)

Amended the Climate Change Response Act 2002 to establish:

Net zero by 2050 for all gases except biogenic methane
Separate methane target (originally 24-47% reduction by 2050)
Five-yearly emissions budgets as "stepping stones"
Mandatory emissions reduction plans
Independent Climate Change Commission

October 2025 Policy Changes

The current government has revised climate policy:

Methane target reduced to 14-24% by 2050
Agricultural emissions pricing delayed to 2030
ETS reform underway (biennial settings)
Carbon Neutral Government Programme target moved to 2050
Focus on "technology-led" approach

Sources: Climate Change Commission, Ministry for the Environment, MBIE, MPI

NZ Emissions Trading Scheme

The primary policy tool for reducing emissions

~$60

NZU Carbon Price (Jan 2025)

Auction floor: $68 | Peak (2022): ~$88

19.1

2025 ETS cap

Mt CO₂-e

6M

Units for auction

2025 (down from 14M)

~50%

Emissions covered

Agriculture excluded

13.8M

Forestry removals

Expected NZUs (2025)

How It Works

Emitters must surrender one NZU (New Zealand Unit) per tonne of CO₂-e emitted. NZUs can be:

Purchased at auction — Government sells limited units
Bought on secondary market — Trading between parties
Received as free allocation — For emissions-intensive industries
Earned from forestry — Trees absorbing carbon

What's Covered

✓ Fossil fuels (petrol, diesel, coal, gas)
✓ Electricity generation
✓ Industrial processes
✓ Forestry (removals & deforestation)
✓ Waste (landfill methane)
✗ Agriculture (reporting only)

The forestry factor: NZ's ETS is unique in having unlimited forestry credits. This has created a large surplus of NZUs and kept prices relatively low (~$60) compared to EU ETS (~€70+). Critics argue this allows emitters to offset rather than reduce emissions.

Recent ETS Developments

August 2024

Government slashes auction volumes by >50% for 2025-29 to address oversupply

December 2024

Industrial allocation baselines updated to better reflect actual emissions intensity

2025

ETS settings review underway; shift to biennial (every 2 years) settings process

By 2030

Government plans to price agricultural emissions (mechanism TBD, not via ETS)

Sources: International Carbon Action Partnership, S&P Global, Climate Change Commission, Ministry for the Environment

Energy Transition Policy

The policy framework driving NZ's clean energy future

⚡ 100% Renewable Electricity

Aspirational target for 100% renewable electricity by 2030. Currently at ~85%. Focus now on "progress over perfection" — reaching 95%+ while maintaining affordability.

Target: 2030

🔋 50% Renewable Energy

Target for 50% of total final energy consumption from renewables by 2035. Requires electrification of transport and industrial heat.

Target: 2035

🚗 Clean Car Standard

CO₂ emissions standards for imported vehicles (new and used). Targets average 112g/km by 2027. Clean Car Discount scheme ended in 2024.

✓ Active

🏭 GIDI Fund

Government Investment in Decarbonising Industry — co-funding for businesses to switch from coal/gas to electricity or biomass for process heat.

✓ Active

🌬️ Offshore Wind Framework

Developing regulatory framework for offshore renewable energy. NZ has world-class offshore wind potential. Consenting framework expected 2025.

⚠ In development

🔥 Gas Transition Plan

Managing decline of natural gas while maintaining energy security. Includes exploring LNG imports and supporting alternative fuels (biogas, hydrogen).

⚠ In development

The electrification opportunity: About 48% of NZ's total energy is currently electric. To reach net zero, this needs to rise to 60-70%+. This means electrifying transport (EVs), process heat (industrial boilers), and building heating — while building enough new renewable generation to meet increased demand.

Key Energy Targets

Target	Deadline	Current	Status
90% renewable electricity	2025	~85%	⚠ Close
100% renewable electricity	2030 (aspirational)	~85%	⚠ Challenging
50% total energy renewable	2035	~40%	⚠ Needs acceleration
Government fleet carbon neutral	2050 (revised from 2025)	—	Delayed

Sources: MBIE, IEA, Electricity Authority, Emissions Reduction Plan

Progress & Outlook

How NZ is tracking and what the experts say

41st

CCPI ranking

Down 7 places (Nov 2024)

"Highly Insufficient"

Climate Action Tracker

Overall rating

-1%

Emissions 2023-24

Gross emissions declined

+147%

GDP since 1990

Emissions only +14%

What's Working

Status assessments reflect comparison against Climate Change Commission pathways and legislated targets, not editorial policy judgments.

✓ Low-emissions vehicle uptake

EV sales have exceeded expectations. Over 5% of the light vehicle fleet is now electric or hybrid.

Ahead of projections

✓ Renewable electricity growth

New geothermal, wind, and solar projects coming online. 1,400MW under construction.

Good momentum

✓ Industrial decarbonisation

GIDI fund supporting coal-to-electricity conversions. NZ Steel transitioning to electric arc furnace.

Progress being made

What Needs Work

⚠ Agricultural emissions

Largest source of emissions still not priced. Pricing delayed to 2030. Technology solutions advancing but not yet scaled.

Significant risk

⚠ Transport emissions

Despite EV growth, total transport emissions still elevated. Public transport and freight decarbonisation lagging.

Needs acceleration

✗ 2050 net zero pathway

Current policies insufficient to reach 2050 target. Third emissions budget (2031-35) at significant risk.

Off track

The positive case: Despite challenges, NZ's GDP has grown 147% since 1990 while emissions rose only 14% — showing economic growth is possible without proportional emissions growth. New renewable generation is accelerating, EV uptake is strong, and technology for agricultural emissions reduction is advancing.

Sources: Climate Change Commission 2025 Monitoring Report, Climate Action Tracker, CCPI 2024, Stats NZ