Why New Zealand’s Budget choices must back climate promises
Climate change doesn’t follow Budget trails - so fiscal mapping must account for long-term emissions goals
Key announcements from Budget 2025
- $367.5m to continue contributions to the International Development Cooperation (IDC) programme. The new funding will be used for IDC projects with a priority focus on the Pacific. It will not be exclusively focused on meeting climate finance objectives
- $232.5m savings through changing the allocation of Waste Disposal Levy revenue to fund a broader range of activities across government that reduce environmental harm or increase environmental benefits, which are currently funded by general Crown revenue. Also, the total amount in the Waste Minimisation Fund will reduce by 49%. An average of $30m per annum remains in the Waste Minimisation Fund for new initiatives
- $26m saved through reducing environmental funds. Broader use of the Waste Disposal Levy revenue will continue funding some areas through a single environmental investment fund of approximately $70m average per annum
- The International Visitor Conservation and Tourism Levy initiative allocates $20m per annum in additional funding to the Department of Conservation. This is from the recent rate increase to $100. In combination with the existing $35m in funding, this provides the Department of Conservation with a total annual investment envelope of $55m per annum to support New Zealand’s status as a world-class destination by ensuring that our wildlife, forests and marine areas continue to be a drawcard for international visitors
- Disestablishment of Crown company Predator Free 2050 Limited with $12.6m funding removed. It also consolidates these functions, alongside other Predator Free 2050 capabilities, within the Department of Conservation
- Reduced Crown funding of $56m for the Energy Efficiency and Conservation Authority (EECA), with a portion being reprioritised towards energy policy resource at the Ministry of Business, Innovation and Employment. The funding decrease to EECA is partially offset by increasing levy funding which now makes up 43.7% of EECA funding
- Climate Change Portfolio – Baseline Savings: This savings initiative reduces funding allocated for scaling up the Voluntary Carbon Market (VCM) by approximately 35%. $0.5 million per annum in funding for VCM remains for work focused on incentivising additional forms of carbon removals
- Climate Resilience for Māori – Downscaling of Fund: This savings initiative reduces funding allocated for the Māori Climate Platform by approximately 33%, to improve value for money and contribute to broader savings across grants and funds. An average of $2.6m operating per annum remains in this fund
By Louise Aitken and Florence Arke
Aotearoa New Zealand, like many nations, has set ambitious climate goals not just to meet international commitments, but to protect its unique environment and economy for generations to come.
These goals are embedded in our Emissions Reduction Plan (ERP). First published in 2022, it’s a legally1 required strategy for emissions reductions for the next 15 years, setting a pathway for Aotearoa New Zealand to meet its emissions reduction 2050 target.
The reduction plan is broken down into five-year budgets, setting a maximum quantity of emissions of all greenhouse gases permitted during that five-year period. To be on track to net-zero, each budget sets this maximum limit lower than the previous one and it must be met, as far as possible, through domestic emission reductions and removals.
The first Emissions Reduction Plan covered 2022-2025, with ERP2 covering 2026-2030. ERP3 then kicks in through to 2035.
The second ERP has been developed to build on the first plan’s momentum with deeper cuts and stronger policies. ERP2 confirms New Zealand is on course to meet the first emissions budget (EB1), but success beyond that depends heavily on how the decisions made today align with our ambition. This includes decisions by government through policy, legislation and incentives, by businesses through their transformation towards a low-emissions economy, and by us all in how we eat, consume, invest and travel.
ERP2 is the Government’s plan for delivering effective climate policies and futureproofing our climate and economy. As we head towards Budget Day on May 22, the critical question arises – will this Budget support our collective climate strategy?
No wealthy economy without a healthy environment
The Our Environment 2025 report makes it clear: a productive, healthy environment is fundamental to economic wellbeing in Aotearoa New Zealand.
Agriculture, fisheries, and tourism form the backbone of our export economy—and they all depend on thriving natural systems. Yet these same industries can also put pressure on the environment, leading to degradation and reduced productivity.
ERP2 proposes practical, sector-specific policies to address this. For example, an agricultural emissions pricing system would encourage uptake of low-emission technologies while maintaining output, building resilience in food production without sacrificing economic value. This is sustainability in action: supporting both ecological and economic health.
Why climate commitments and Budget choices matter
Globally, there is a well-established connection between climate change and economic growth from both a risk and opportunity perspective.
This is also the case for Aotearoa New Zealand. ERP2 emphasises the importance of domestic finance flowing into low-emission activities to meet our targets. This is underscored by Deloitte’s 2023 Turning Point economic modelling which illustrates that decisive climate action could deliver $64 billion to New Zealand’s economy by 2050.
As our economy transitions to a low-emissions future, we will benefit from the emergence of new sectors that drive increased growth and employment. The national identity of Aotearoa New Zealand is increasingly shaped by sustainability, strengthening our competitive edge. But the opposite is also true. Inadequate action could cost the country $4.4 billion—and that loss could balloon exponentially towards 2100 if we continue to delay.
The Government has a central role to play in enabling this transition, especially for sectors facing the greatest challenges in rapid decarbonisation.
If the upcoming Budget fails to support ERP2, it will send mixed signals. Funding fossil fuel-heavy infrastructure or neglecting investment in clean tech risks derailing climate targets. Halting the progress on the key enablers to the flow of capital, like the Sustainable Finance taxonomy and support for green investments, will only push the cost to future Emission Reduction Plans, and ultimately to future generations of citizens and taxpayers.
Such misalignment won’t just harm our international credibility—it will bring very real consequences: more extreme weather, higher food prices, health and infrastructure strain, and deeper economic volatility. If we don’t fund the future we claim to believe in, we are actively budgeting against it.
Watching the Budget
The 2025 Budget is due on May 22 and conversations are already turning to infrastructure and growth. These debates will shape the headlines but there’s a glaring gap in the conversation: sustainability for both our people and for the land on which we stand.
Sustainability and climate change should not be treated as a separate or secondary issue. It is core to economic policy. Where we invest today determines the resilience and prosperity of tomorrow.
That’s why we’ll be closely reviewing the Budget when it’s released and assessing whether it reflects the goals of ERP2 and supports the transition to a low-emissions economy. If it does, it’s a step towards securing the long-term wellbeing of all New Zealanders. If not, we risk falling off track—at a cost we can’t afford.
Endnotes
- Legally binding under the Zero Carbon Act
