Executive summary: Advice on the fourth emissions budget

Under the Climate Change Response Act 2002, He Pou a Rangi Climate Change Commission must provide the Government with advice on setting Aotearoa New Zealand’s fourth emissions budget by the end of 2024.

As part of this work, we also advise whether revisions are needed to the first, second and third emissions budgets, and on the rules that apply to emissions budgets.

This advice sets out our recommendations for the fourth emissions budget (covering the period 2036–2040), following consultation on draft advice in April and May 2024.

It shows how Aotearoa New Zealand can best take advantage of the benefits and opportunities presented by the transition to a thriving, low emissions economy.

This final advice is updated with new information and the latest available data, and informed by consultation feedback. The insights and evidence provided through consultation have tested and strengthened our understanding of the options available, as well as the potential issues and impacts of emission reductions.

Key points for decision-makers

Emissions budgets turn a long-term target into achievable steps, and provide predictability and stability for Government, business and community action.

This advice recommends a level for the fourth emissions budget (for the period 2036–2040) as the next step on the country’s path to the 2050 target – based on the latest evidence and data, including insights received through our call for evidence and consultation.

Our recommendation is both ambitious and achievable. It provides flexibility for the future, and offers lasting economic, societal and environmental benefits that will likely exceed overall costs.

We have also provided advice on updates to the previous emissions budgets, and the rules that govern how greenhouse gases are measured and monitored in Aotearoa New Zealand. This is part of the system that allows for response to changed conditions, supporting the country to stay on course for achieving its long-term climate goals.

What matters when considering the fourth emissions budget

• The recommended level for the emissions budget for 2036–2040 is a feasible and effective next step in the country’s emissions reduction efforts.
• Our recommendations are based on a close review of the emissions reduction action already happening, and opportunities for further reductions – this is what forms the base of the ‘EB4 demonstration path’ that underlies the advice.
• The recommendations take into account benefits, challenges and risks that require careful consideration to ensure success. We did this through exploring alternative ways the budgets could be met, and through sensitivity analysis.

Key facts and figures

• We are recommending a fourth emissions budget of 160 MtCO2e: the annual average emissions in the budget period would be 56% lower than they were in 2022.
• A comparison of actual emissions in 2022 to expected emissions in 2040 (the last year of the budget period) shows gross emissions of all greenhouse gases would reduce by 37% from 79 MtCO2e to 50 MtCO2e, while carbon dioxide removals by forests would increase from 5 MtCO2e to 22 MtCO2e.
• By sector, the largest reductions in gross emissions come from energy (21 MtCO2e), transport (18 MtCO2e) and agriculture (17 MtCO2e) – this is a comparison between the recommended fourth emissions budget and the third emissions budget as set by the Government in 2022.
• We estimate there will be no noticeable impact on the level of GDP in the budget period from following the EB4 demonstration path.
• There are substantial co-benefits of action to reduce emissions. We anticipate improvements in health valued at $2.1 billion a year in the fourth emissions budget period, from cleaner air when less fossil fuels are burned for transport.
• For many of the actions in the EB4 demonstration path, investments made in low emissions technologies will more than pay for themselves from 2036 onwards through fuel savings and lower maintenance costs. Since some technologies, for example those related to biogenic methane, are expected to emerge during the fourth emissions budget period, the impacts and benefits of that technology will be realised over following budget periods.
• We estimate direct financial savings from actions that reduce gross emissions would grow to NZ$1 billion per year by the end of the fourth budget period.

Next steps: It is the Commission’s role to advise on emissions budgets, and the Government’s role to set these budgets and create the emissions reduction plans and policy to meet them. The Minister of Climate Change is required under the Act to set the fourth emissions budget by 31 December 2025.[1]

What we are recommending

Recommended level for the fourth emissions budget

Our recommended level for the fourth emissions budget is 160 MtCO2e. This means the net average annual emissions in the budget period (2036–2040) would be 56% lower than they were in 2022. We have revised this recommended level based on tested methods of analysis of the latest available information and evidence, including feedback on our draft advice.

We recommend a limit of zero for offshore mitigation to meet the fourth emissions budget.

Recommended revisions to the set emissions budgets

We recommend adjustments to the first, second and third emissions budgets, to reflect changes in the country’s official calculation of greenhouse gas emissions (New Zealand’s Greenhouse Gas Inventory, or the GHG Inventory), and the impact of higher rates of forestry planting than were projected at the time those budgets were set.

Rules for measuring progress towards meeting emissions budgets and the 2050 target

We have recommended matters the Government should consider in developing accounting methodologies for additional emissions sources and sinks. We do not, however, recommend any changes to the rules that govern current greenhouse gas measurement and calculation.

A full set of recommendations is on pages 25–28 of this report. The approach taken, and the final analysis underlying these recommendations, are summarised in this executive summary, along with an overview of how we have responded to feedback on the draft advice.

The next step in Aotearoa New Zealand’s transition to low emissions

Emissions budgets limit the amount of greenhouse gases Aotearoa New Zealand can emit in a five-year period. They act as stepping stones, guiding the country’s path to meeting the 2050 target in an ambitious, achievable, and measurable way.

In 2022, the Government, with cross-party support, set Aotearoa New Zealand’s first emissions budget (2022–2025), second emissions budget (2026–2030), and third emissions budget (2031–2035).

In 2025, the Government will need to set the fourth emissions budget (2036–2040), as the next step in the country’s transition to low emissions.

The Government has made its commitment to achieving the 2050 target clear. Our final advice provides the Government with independent, expert advice on the choices it has in setting the level of the fourth emissions budget, and on the path to follow to achieve those outcomes. The decisions the Government makes will affect what kinds of benefits and opportunities are available to households, businesses and communities, and how Aotearoa New Zealand is able to manage risks and uncertainties in the years ahead.

At all times, there are at least three emissions budgets in place, giving households, businesses and communities a view of Aotearoa New Zealand’s emissions reduction path at least 10 years into the future. When people are clear on the way forward, they can make informed planning decisions and invest confidently in low emissions alternatives, such as heat pumps and electric vehicles.

Because emissions budgets are set as a net volume of greenhouse gas emissions, they can be met through a combination of actions, including:

• reducing gross emissions (reducing emissions at their source)
• removing carbon dioxide from the atmosphere (for example through growing trees)[2]
• in limited circumstances, using offshore mitigation (when Aotearoa New Zealand pays for emissions reductions or removals that occur overseas)

Our approach to developing this advice

The Commission’s approach to developing this advice is based on tested methodology, building on the approach and process developed when the Commission advised on the first three emissions budgets in 2021 (Ināia tonu nei: a low emissions future for Aotearoa).

Our approach, as an independent Crown entity, is founded on research, evidence and modelling, and draws on the expertise of our Board of Commissioners, He Pou Herenga (a Māori advisory body to the Board), and staff. In preparing this advice on the fourth emissions budget, we have examined the latest publicly available data on the country’s emissions profile and the scientific evidence about options for reducing emissions, and feedback from consultation.

We gained invaluable insight by engaging with people on the ground. This included our consultation on the draft advice in April and May 2024, our earlier call for evidence, and the information gathered from engagement with iwi/Māori and stakeholders over the course of the Commission’s existence. This engagement informed our modelling and helped shape our final advice. It has allowed us to test our assumptions and strengthen our understanding of the future actions Aotearoa New Zealand can take to reduce its emissions – see ‘What we heard and how we responded’ following.

In forming our key judgements and final recommendations, we have carefully considered a wide range of factors as required by the Climate Change Response Act 2002 (the Act). This includes the latest science and technological developments, opportunities for reducing or removing emissions, and the limits of what is achievable. We have taken into account the Crown–Māori relationship, te ao Māori and specific effects on iwi/Māori, and the likely impacts of actions taken to meet emissions budgets (see Figure 1.4 in Chapter 1: Introduction).

How we reached our recommendations on the level of the fourth emissions budget
Our analysis shows there are multiple ways Aotearoa New Zealand could achieve the 2050 target. The Government has choices about what level it will set for the fourth emissions budget, and the path taken to achieve those outcomes.

To develop our final advice on the fourth emissions budget we looked at what has changed since the first three emissions budgets were set by the Government, including the options available for Aotearoa New Zealand to reduce its emissions. Those changes include updated information and trends, assumptions (reflecting new evidence), the New Zealand Greenhouse Gas Inventory (GHG Inventory) and updated projections from government agencies.

Using this updated information about possible emissions reductions and removals, we modelled different scenarios to help us understand what mix of actions and levels could achieve the 2050 target. As part of this work, we created a ‘reference scenario’ as a baseline; this allows comparison of proposed action to current policies and measures. This is explained further in Chapter 4: Developing the path to the fourth emissions budget.

To illustrate how budgets could realistically be met we developed an ‘EB4 demonstration path’, which is a set of measures and actions that would achieve the proposed budget.[3] We updated this EB4 demonstration path for our final advice, to arrive at the recommended level of the fourth emissions budget, and recommended breakdown of greenhouse gases.

As part of this we tested alternative ways in which the budgets could be met, to ensure the recommended budget could be met through a range of ways. We also looked at how changes in some assumptions would affect the level of emissions through ‘sensitivity analysis’. This checked what would happen if important factors were different from the assumptions made, and was a critical step in demonstrating that the recommended budget could be met.

Our final advice on the fourth emissions budget reflects our judgements of what would be ambitious and achievable, provide flexibility for the future, and offer lasting economic, societal and environmental benefits that will likely exceed overall costs.

How we reached our recommendations on revising the first, second and third emissions budgets

Part of our task in advising on emissions budgets is to look back at the budgets that have already been set, and consider whether any revisions are needed. This is our first review of set emissions budgets, and we developed a new process for this work, based on the requirements in the Act.

The Commission can only advise a change to emissions budgets if we find evidence that specific circumstances have changed since the budgets were originally set. It is the Minister of Climate Change’s decision whether to revise an emissions budget. For the current budget period (2022–2025), the threshold for change is higher – there need to be ‘exceptional circumstances’ for the Minister to revise a budget after the budget period has begun.

These requirements set a high bar for change, helping to ensure stability for households, businesses, and communities while still allowing flexibility for the country to respond to significant changes in circumstance.

For set emissions budgets, the two kinds of change we checked for were:

• methodological changes to the way the GHG Inventory calculates and reports greenhouse gas emissions and removals
• significant changes in circumstances (such as economic circumstances, scientific advice and technological developments) since the emissions budgets were set.

Our recommendations on revising the first, second and third emissions budgets reflect the impacts of the methodological and significant changes we found. Our final analysis shows our recommended revisions would bring the first, second and third emissions budgets back in line with the original intent when they were set.

How we reached our recommendations on rules used to measure progress

We are also required under the Act to assess if changes are needed to rules for measuring progress towards meeting emissions budgets and the 2050 target.

We looked at whether the Government has updated its approach to emissions accounting (since our previous advice in 2021 when the first three emissions budgets were set) to understand whether changes are needed to the rules to measure progress towards meeting emissions budget and the 2050 target. We did not recommend changes to the current accounting rules, but we do make a recommendation about matters to consider when Government is developing accounting methodologies for additional emissions sources and sinks.

Our engagement included an initial call for evidence in 2023, and consultation on our draft advice in April and May 2024.

This final advice incorporates the contribution of over a thousand people from across the motu who participated in our consultation process. This included representatives of over 300 organisations and community groups. These discussions and written submissions tested and strengthened our approach and conclusions.

Themes that emerged from feedback

We invited people to share their priorities for the country’s climate change response. The feedback we receive about values and priorities informs Commission advice, and is reflected to Government decision-makers, and to people in the community who act in response.

The Government has choices about how to reduce Aotearoa New Zealand’s greenhouse gas emissions. Our advice provides a thorough and robust package of information and analysis that can help the Government understand the implications of its choices about emissions reduction and where value judgements need to be made.

We heard four different themes in the feedback received:

• values and priorities in decisions about climate change response
• areas to consider while reducing greenhouse gas emissions
• the role of government in reducing emissions
• practical options the country has to reduce greenhouse gas emissions.

We carefully considered the points, priorities and values that emerged under these themes – see Chapter 2: What we heard.

Specific feedback on our draft advice on the fourth emissions budget

Consultation on our draft advice for the fourth emissions budget allowed us to test our draft recommendations, approach, assumptions and evidence base.

Feedback on the proposed level and demonstration path

Most submitters agreed with our approach to developing the demonstration path and our assessment of the considerations for the fourth emissions budget level, including our key judgements. Submitters provided a range of evidence on the feasibility, cost and implications of options for reducing emissions. We assessed the evidence and updated some of our modelling assumptions. Updated assumptions reflect new information on expected forestry planting rates, availability of gas supply, biomass use at the Huntly power station, electric arc furnace use for steel production, and feasibility of new geothermal power generation.

Feedback on assessment of impacts

There was support from most submitters for our assessment of the impacts of action to reduce emissions to the proposed level for the fourth emissions budget.

We received a range of feedback on other impacts that should be considered, or given more prominence. This informed our assessment of how actions to achieve the recommended fourth emissions budget could affect people and communities across Aotearoa New Zealand.

Overall, we assess the level of impacts to be similar to that in our draft advice. In many places we have revised our description of impacts to reflect insights provided in feedback. This includes changing how we describe effects specific to iwi/Māori to better reflect the whakaaro heard in feedback.

Feedback on proposed revision of set budgets

There was support from most submitters for our approach to assessing whether changes were needed to the first three emissions budgets. Most agreed with our proposal to revise those budgets for changes in the methodology for emissions accounting, and with our assessment of significant changes that justified revision of a set budget.

We updated our assessment of the effects of changes in methodology for emissions accounting and confirmed our assessment that the recent higher rates of exotic afforestation, from the available data, are the only significant change to information that has occurred since budgets were previously set.

Feedback on measuring progress towards emissions budgets and the 2050 target

Most submitters agreed with our assessment that the Government should continue with the existing approach to measuring and calculating emissions, and also with our draft recommendation on what the Government should consider when developing accounting methodologies for additional emissions sources or sinks.

Our recommended level for the fourth emissions budget is 160 MtCO₂e. The recommended level means the net average annual emissions in the budget period (2036–2040) would be 56% lower than they were in 2022.

The choices that Government has in how it meets the fourth emissions budget involve decisions around the mix of actions and policies to reduce emissions, and how much forestry will play a role to remove carbon dioxide from the atmosphere. These choices matter, as each decision will have benefits and consequences.

The Act requires that our advice on the fourth emissions budget includes how we expect the budget, and the 2050 target, could be realistically met – and must show the corresponding levels of gross emissions reductions and removals, and the contribution of each greenhouse gas. To do so we have looked at what we think is the best course of action for Aotearoa New Zealand, with consideration to a range of matters under the Act.

Our recommendations for the breakdowns in reductions and removals, and volumes of different greenhouse gases, are shown on pages 25–26, along with our recommendation on the contribution of offshore mitigation to the budgets as required in the Act.

Advice to inform Government decisions for future emissions reduction

Our final advice provides the Government with the basis to decide on a fourth emissions budget level, which will help determine the trajectory of Aotearoa New Zealand’s emissions reduction out to 2050. It also sets a path for decisions needed on how the emissions budget is achieved through specific policies and actions – which Government will set out in the emissions reduction plan for that fourth budget period.

Our analysis shows that there are opportunities to reduce gross emissions on the path towards the fourth emissions budget that would bring a wide range of benefits for Aotearoa New Zealand. There remains an important role for greenhouse gas removals through forestry to meet and maintain the net zero component of the 2050 target. We have found that – due to the opportunities for gross emissions reductions and recent high levels of planting – less afforestation would be needed in the future than anticipated when we advised on the first three emissions budgets in Ināia tonu nei. This also means that investing in carbon capture and storage technologies may not need to play a large role to achieve the 2050 target.

Achieving the fourth emissions budget this way would allow the country to reduce emissions in line with meeting the 2050 target, while accessing a range of opportunities and benefits for the economy, society, the environment and future generations. It would give Aotearoa New Zealand flexibility to respond to new information about the viability of different emissions reduction technologies and opportunities.

What the recommended fourth emissions budget might mean for New Zealanders

The role of the Commission in advising the Government requires us to consider the implications of decisions about emissions reduction for the country as a whole. This is fundamental for informing the judgements we need to make in advice on the fourth emissions budget, and will be important for the Government to consider in its final decisions.

Setting the level of an emissions budget does not on its own have direct impacts on people. It is the choices made to achieve the budget that determine the impacts that the budget creates. Some of these choices are made by government, others by individuals, businesses, industries or even the international community.

Consideration of impacts means taking into account all the changes that can be expected, both positive and negative, from the actions required to meet an emissions budget. Understanding the likely opportunities and challenges enables us to understand how New Zealanders will be affected by the fourth emissions budget, and if the impacts on the economy, businesses, households and whānau, regions and communities, iwi/Māori, and the environment can be managed in an equitable way.

Assessing the consequences of choices for a future period is challenging, even as an idea. We have built on the process used for our earlier work on the first three emissions budgets, as set out in Ināia tonu nei.

To assess impacts we look at the differences between our reference scenario and the EB4 demonstration path (see ‘How we reached our recommendations on the level of fourth emissions budget’). For example, when we look at the savings from electric vehicles, we estimate this based on the difference in the number of electric vehicles in the reference scenario, and the number of electric vehicles in the EB4 demonstration path.

Our assessment of how changes to achieve the recommended fourth emissions budget could affect people and communities across the motu and over time was updated to reflect feedback from consultation and new information and data.

We assessed the potential economic impacts of the recommended fourth emissions budget
Our assessment of the potential economic impacts used a range of models and approaches, which provide different perspectives and insights. This is important because focusing on a single perspective alone would provide an incomplete picture of the overall outcomes from the EB4 demonstration path and potentially be misleading.

Our analysis shows that if the country acted to achieve the recommended level of emissions reductions for the 2036–2040 period, the overall effect would be economic and social gains. This depends on making changes that reduce gross emissions and can unlock co-benefits. Significantly, our work shows that cleaner air from less fossil fuels burned for transport (from a faster transition to electric vehicles and reducing private vehicle use) would lead to improvements in health valued at around NZ$2.1 billion a year over the fourth emissions budget period.

We looked at the changes in direct financial costs and savings under the EB4 demonstration path, compared to the reference scenario. Analysis using the Energy and Emissions in New Zealand (ENZ) model showed that, for many of the actions in the EB4 demonstration path, investments made in low emissions technologies will more than pay for themselves in the long term through fuel savings and lower maintenance costs.

We estimate direct financial savings from actions that reduce gross emissions would grow to NZ$1 billion per year by the end of the fourth emissions budget period.

We also considered the impacts of following the EB4 demonstration path on the whole of Aotearoa New Zealand’s economy. This perspective helps us to see the big-picture effect of our proposals on the economy as well as how things shift between sectors.

For the fourth emissions budget period we anticipate that following the EB4 demonstration path would not lead to a noticeable change in the level of GDP compared with the reference scenario. In 2050 we estimate a GDP level around 1% lower than if the country made no change from the current trajectory as shown in the reference scenario.[4]

Our economic analysis provides no evidence that the recommended level for the fourth emissions budget is unattainable, or would provide significant or material economic impacts for the country as a whole. We expect it to result in a different pattern of economic activity than the reference scenario – with the output of some sectors increasing and others decreasing. The distribution of these changes will also depend on the policies chosen to achieve the budget.

The Crown–Māori relationship, te ao Māori, and specific effects on iwi/Māori

We have considered specific effects for iwi/Māori, as well as wider matters relating to te ao Māori and the Crown–Māori relationship. Our assessment recognises the potential benefits presented by the transition to a lower emissions economy as well as the accompanying need to increase resilience to the impacts of climate change. This is based on what we have heard through our recent consultation, as well as earlier engagement and consultations, and from research.

We heard that the Māori economy’s level of investment in land-based activity increases iwi/Māori exposure to climate change, while the higher proportion of lower income households that include Māori may expose iwi/Māori to greater costs or make the transition harder.

We also heard that many iwi/Māori are already helping lead the response to climate change, as tangata whenua, rangatira and kaitiaki. Almost all Māori submitters noted their communities’ existing climate strategies or initiatives to reduce emissions and manage the effects of climate change. There was a call for local and central government to resource these plans and initiatives to support faster emissions reduction, to the benefit of the community, and ultimately all of Aotearoa New Zealand.

Choices made about actions to meet the fourth emissions budget also present opportunities and risks for the Crown–Māori relationship. An effective relationship between iwi/Māori and the Crown and private entities is more likely to lead to effective and durable emissions reductions, avoiding unnecessary delays and costs.

The Government has a role in ensuring the transition to low emissions supports New Zealanders

While many actions to meet the fourth emissions budget will have positive impacts, some actions or changes may be harder to navigate – particularly for certain sectors, communities, some iwi/Māori, and households.

While household electricity bills are unlikely to significantly change, there may be some upward pressure on prices. There are also expected increases in the cost of fossil gas for households using it for heating and cooking, and in petrol and diesel prices.

People on lower incomes may be more in need of energy efficiency and cost saving measures but also less able to afford them. Government support targeted to those people facing cost or other barriers during the low emissions transition will be important to manage impacts.

For fossil fuel sectors such as coal, mining and gas, the transition to a low emissions economy is expected to result in reduced revenue and reduced opportunities for employment. For agriculture, reducing emissions in line with meeting our recommended fourth emissions budget is not expected to significantly diminish profit levels; there is, however, expected to be an effect on the growth of revenue. Managing impacts in specific subsectors will likely require changes in operating practices, informed by education and training, as well as support from the Government.

By clearly signalling its transition plans, the Government can help to provide certainty and time for sectors and communities to plan and change. Targeting policies, investment and support to those who will face the greatest relative costs will be important for managing impacts.

Part of our work providing advice on setting a new emissions budget includes looking back at the emissions budgets that have already been set, and considering whether any revisions are needed. These reviews help ensure that previously set budgets remain ambitious, and technically and economically achievable over time, and that Aotearoa New Zealand stays on track to meet the 2050 target.

Achieving the fourth emissions budget will depend on actions taken during the first three emissions budgets to reduce emissions, including building renewable energy infrastructure, transitioning to electric vehicles, and improving the productivity of agriculture.

We can, however, only recommend revisions to emissions budgets that are already in place, if there have been changes to the way the country’s emissions are calculated and reported, or if significant changes in circumstances have occurred since the budgets were originally set.

Our analysis shows that methodological changes have occurred since the budgets were originally set and we recommend that methodological changes are incorporated into revisions for all emissions budgets as a matter of course. Methodological changes in 2024 impacted the first and second budget periods, but not the third.

We have also assessed that the impacts of higher rates of recent forestry planting are a significant change in the second and third emissions budget.

These recommended revisions are set out in detail on page 27 of the full report.

Rules for measuring progress

Our role advising on emissions budgets includes reviewing the rules that govern how greenhouse gas emissions are measured and calculated in Aotearoa New Zealand. These are used for measuring progress towards meeting emissions budgets and the 2050 target, and identifying whether changes are needed to stay on track.

We first advised on these accounting rules in Ināia tonu nei. When the Government set the first three emissions budgets, it put in place rules that were largely in line with our advice. Under these rules, all emissions produced within Aotearoa New Zealand count towards emissions budgets. The current rules also have a specific way of calculating emissions related to planting and clearing forests.

Our final advice has no recommendation about changes to the current accounting rules. We do, however, make a recommendation about matters the Government should consider in developing accounting methodologies for additional emissions sources and sinks. We also strongly encourage reporting of the options considered and rationale for choices made.

What matters when changing methods for emissions measurement and reporting

The Government has indicated it plans to make two changes in its approach to measuring and reporting emissions, which may impact emissions budgets:

• The Government has said it intends to make changes that will allow emissions and removals from pre-1990 forest management activities to be included when calculating Aotearoa New Zealand’s emissions.[5]
• It has started work to include additional sources of emissions and removals, outside those counted under current accounting rules.

Without careful consideration, these changes could make it possible to achieve set emissions budgets without meaningfully reducing gross emissions. This would impact how effectively these budgets can help Aotearoa New Zealand step down its emissions in line with achieving the 2050 target, so contributing to global efforts to limit warming to 1.5°C above pre-industrial levels.

By applying principles of additionality (where removals are only counted if they are ‘additional’ to the status quo) and permanence (which considers how long removed emissions can be stored) to accounting rules, the Government can help ensure Aotearoa New Zealand’s efforts to reduce emissions are not unintentionally undermined by any changes to how emissions are measured and reported.

We are recommending the Government adopt these two principles and include them as criteria when calculating removals. We are also recommending the Government develop and implement long-term plans for measuring and monitoring the new sources of emissions and removals, and managing related risks and uncertainties.

Under the Act, we are required to provide the Government with advice on specific matters related to the fourth emissions budget. These are our recommendations to Government:

Recommendation 1 – Proposed budget level

We recommend that the Government set the fourth emissions budget (2036–2040) at 160 MtCO₂e (total, AR5 GWP₁₀₀)

Recommendation 2 – Breakdown of the fourth emissions budget

We recommend that, to meet the fourth emissions budget (2036–2040), the Government implement policies that result in a balance of emissions and removals as outlined below:* 

*All values listed in MtCO₂e are calculated using the IPCC AR5 GWP₁₀₀ values; components may not sum to total due to rounding.

Recommendation 3 – Reductions by greenhouse gas to meet the emission budget

We recommend that, to meet the fourth emissions budget, the Government implement policies that deliver reductions of each greenhouse gas as outlined in this table*:

*All values listed in MtCO₂e are calculated using the IPCC AR5 GWP₁₀₀ values; components may not sum to total due to rounding.

Recommendation 4 – Limit on offshore mitigation for the fourth emissions budget and circumstances justifying its use

We recommend that, to meet the fourth emissions budget (2036–2040), the Government:

1. limit offshore mitigation for the fourth emissions budget to 0.0 MtCO₂e
2. only use offshore mitigation as a last resort in exceptional circumstances beyond the Government's control, such as force majeure events, where domestic measures cannot compensate for emissions impacts.

Recommendation 5 – Revisions to the set emissions budgets

We recommend that the Government revise the first, second and third emissions budgets as outlined in the table* below:

*All values listed in MtCO2e are calculated using the IPCC AR5 GWP100 values.

Recommendation 6 – Rules to measure progress

We recommend that, as the Government considers whether to include any new sources of emissions or carbon dioxide removals in its accounting for emissions budgets, it:

1. adopts the principles of additionality and permanence (durability) and includes them as criteria for any recognised carbon removal activities, along with other key characteristics including removal capacity, measurability, cost, and acceptability;
2. develops and implements a long-term plan for measuring and monitoring additional sources, sinks, and changes in management activities, including how the plan will be funded;
3. develops and implements a plan for how the Government will manage accuracy and uncertainty risks, limiting the risk that over- or under-estimation will impact long-term emissions trajectories and associated emissions reduction efforts.

[1] All carbon dioxide equivalents presented in this report are on the AR5 GWP100 basis. See Box 3.1 in Chapter 3: Recommended level for the fourth emissions budget for further information on greenhouse gas metrics.

[2] Currently, planting and growing trees is the only method of removing and storing carbon dioxide from the atmosphere in Aotearoa New Zealand.

[3] The EB4 demonstration path is a tested set of measures and actions within each sector that would deliver the recommended fourth emissions budget. It is not the only option, it is not a forecast of what will happen, and it is not a strict plan that Government must follow.

[4] The estimated change in GDP should be considered in the context of the great uncertainty inherent in predicting the level of GDP over 25 years.

[5] We understand this is now scheduled to be published as part of the country’s first Biennial Transparency Report before the end of 2024.