EXPLAINER: EMISSION BUDGETS [EB’s] AND EMISSION REDUCTION PLANS [ERP’s]
1. LEGISLATION
These two [EB and ERP] tools have been developed as a mechanism to help ensure that New Zealand has the implementable plans and processes in place to meet the country’s 2050 emissions targets[1]. This legislation - the Climate Change Response (Zero Carbon) Amendment Act 2019 – also provided for the creation of these tools:
Emissions Budget: The quantity of emissions that will be permitted in each emissions budget period as a net amount of carbon dioxide equivalent. [There are always 3 budgets in place, one current and two prospective.]
Emissions Reduction Plan: A plan for achieving an emissions budget prepared in accordance with sections 5ZG to 5ZI of the ‘Zero Carbon’ Act
The First EB and ERP cover the four-year period 2022 – 2025, with subsequent intervals being five yearly until 2050; i.e.EB2/ERP2 covers the period 2026 – 2030; EB3/ERP3:2031 – 2035 etc.
The roles of the Climate Change Minister [“The Minister”] and the Climate Change Commission [“The Commission”] in the setting, advising and monitoring EB’s and ERP’s are described in Part 1B “Emission reduction”, of the Climate Change Response Act [“CCRA”] 2002 (Version as at 26 November 2024)
2. EMISSION BUDGETS [EB’s] - THE PROCESS AND THE FIGURES
2.1 The timeframe for the publication of Emission Budgets by the Minister is prescribed by s5X(3) in the CCRA
2.2 The first step in this process is that the Climate Change Commission provides advice to the Minister on Emissions Budgets [s5ZA, CCRA]
The Commission advises the Minister as to what it believes is an appropriate figure for the relevant emissions budget period, having regard to a number of considerations [s5J, s5M and 5ZC, CCRA]
The Commission provided its advice on EB’s 1 – 3 (and direction for ERP1) in May 2021[2]. The Commission’s advice was:
Table 1: Climate Change Commission’s 2021 advice re the setting of EB1 – EB3
More recently, in November 2024, the Commission has published its advice on the fourth emissions Budget for the 2036 – 2040 period, recommending a figure of 160 MtCO2e (or 32 MtCO2e/year).[3]
The government has not yet released its response to the Commission’s advice on the fourth emissions budget. The response is required by December 31, 2025.
2.3 The second step is for the Minister to respond to the Commission’s advice and set and publish an Emissions Budget [s5ZB,5ZD CCRA]
The Government published EB 1 – 3 in May 2022, with EB 2 and 3 figures slightly smaller than the Commission’s recommendations[4]:
Table 2: Government 2022 EB1 – EB3 settings
2.4 The third step is that the process of setting a new EB (every 5 years) includes a review of notified EB’s to ensure that they are flexible to changing circumstance and that they remain ambitious, and technically and economically achievable over time. Additionally, the Commission may recommend a notified (i.e. set but upcoming rather than current) EB be changed in the light of either [5ZE(1), CCRA]:
Methodological improvements to the way budgets are measured or reported OR
One or more significant changes have affected the considerations listed in section 5ZC(2) on which an emissions budget was based.
The Commission, in the light of methodological changes that affected EB 1 and 2 and a significant change - higher rates of exotic afforestation – impacting EB 2 and 3, determined it was appropriate to review EB1 – 3 and this was carried out in 2024[5]
Table 3: November 2024 Proposed revised EB 1 – 3 figures recommended by the Commission [Refer Table 7.3]
The government has not yet released its response to the Commission’s advice on the fourth emissions budget
2.5 The Commission must produce, annually, the latest projections for current and future emissions and removals; and an assessment of the adequacy of the emissions reduction plan and progress in its implementation, including any new opportunities to reduce emissions.[s5ZK(2), CCRA].
In July this year the Commission published its latest emission reduction report[6]. It found that:
The country is likely to achieve the first emissions budget (for 2022–2025) due to a combination of emissions reductions and changes to accounting methods.
The second emissions budget (for 2026–2030) can be met but there are some areas of significant risk.
Current plans are insufficient to meet the third emissions budget (for 2031–2035) and further action is required before the third emissions reduction plan.
There are also significant risks for meeting the 2050 target without further action.
2.6 Lastly, not later than 2 years after the end of an emissions budget period, the Commission must prepare a report for the Minister evaluating the progress made in that emissions budget period towards meeting the emissions budget for that period [s5ZL(1), CCRA] – and the Minister must respond to the report [s5ZL(2)(3), CCRA]
3. EMISSION REDUCTION PLANS [ERP’s]
3.1 For each EB period the Minister must prepare and make publicly available a plan setting out the policies and strategies for meeting the relevant emissions budget; by the deadlines specified [s5ZG, s5ZI, CCRA]
3.2 ERPs requires climate action from every part of government and sector of the economy including:
transport
energy
building and construction
waste
agriculture
forestry.
3.3 The first step in this process is that, not later than 24 months before the beginning of an emissions budget period, the Commission must provide to the Minister advice on the direction of the policy required in the emissions reduction plan for that emissions budget period [s5ZH, CCRA]
3.4 As well as advice on EB’s, the Commission’s report “Ināia tonu nei: a low emissions future for Aotearoa …” also contained advice around the direction for ERP1[7]
3.5 ERP 1 (2022 -2025) was published by the Government in May 2022 (revised June 2022)[8] It contained their view on “the strategies, policies and actions for achieving our first emissions budget, as required by the Climate Change Response Act 2002” and This “responds to the recommendations of He Pou a Rangi – Climate Change Commission (the Commission) in its report, “Ināia tonu nei: a low emissions future”
3.6 ERP1 was subsequently modified by the Government in 2024[9] in the light of their new climate change strategy.
3.7 The Commission published their advice on ERP2, covering the period 2026 – 2030,(the EB2 operative period) in 2023, finding that emissions are decreasing, but further Government action is needed[10]
3.8 ERP 2 – which was published by the Ministry for the Environment in 2024 and will come into effect at the end of 2025.[11]. It is noted that ERP2 will detail the actions New Zealand will take to meet its emissions reduction targets and align with its Nationally Determined Contribution (NDC)
Footnotes:
[1] Net zero greenhouse gas emissions (except biogenic methane) and a 24 – 47% reduction (from the 2017 calendar year level) in biogenic methane.
[2] Climate Change Commission, “Ināia tonu nei: a low emissions future for Aotearoa Advice to the New Zealand Government on its first three emissions budgets and direction for its emissions reduction plan 2022 – 2025” 31 May 2021, https://www.climatecommission.govt.nz/assets/Inaia-tonu-nei-a-low-emissions-future-for-Aotearoa/Inaia-tonu-nei-a-low-emissions-future-for-Aotearoa.pdf
[3] Climate Change Commission, “Advice on Aotearoa New Zealand’s fourth emissions budget” November 2024. https://www.climatecommission.govt.nz/assets/Advice-to-govt-docs/Target-and-budgets-final-reports/Climate-Change-Commission-EB4-Final-Advice-1.1.pdf
[4] Ministry for the Environment, “Aotearoa New Zealand's first emissions reduction plan: The Government's response to Не Pou a Rangi – Climate Change Commission's recommendations”, May 2022, https://environment.govt.nz/assets/publications/Files/The-Governments-response-to-He-Pou-a-Rangi-Climate-Change-Commissions-recommendations.pdf
[5] See Footnote # 22, Chapter 7 : “Recommended changes to the first, second and third emissions budgets”, pp 170 - 184
[6] Climate Change Commission, “Monitoring report: Emissions reduction Assessing progress towards meeting Aotearoa New Zealand’s emissions budgets and the 2050 target” July 2025, https://www.climatecommission.govt.nz/assets/Monitoring-and-reporting/ERM-2025/CCC-5929-ERM-2025.pdf
[7] See Footnote # 21 “Part2 Emissions reduction plan advice,” Chapters 11 – 20 (pp 209 – 348)
[8] Ministry for the Environment, Te hau mārohi ki anamata Towards a productive, sustainable and inclusive economy AOTEAROA NEW ZEALAND’S FIRST EMISSIONS REDUCTION PLAN, May 2022, https://environment.govt.nz/assets/publications/Aotearoa-New-Zealands-first-emissions-reduction-plan.pdf
[9] Ministry fir the Environment “New Zealand's first emissions reduction plan: Amendment 2024”, December 2024, https://environment.govt.nz/assets/publications/climate-change/NZs-first-emissions-reduction-plan-amendment-2024.pdf
[10] Climate Change Commission, “2023 Advice on the direction of policy for the Government’s second emissions reduction plan”, November 2023, https://www.climatecommission.govt.nz/assets/Advice-to-govt-docs/ERP2/final-erp2/ERP2-Final-Advice-for-web.pdf
[11] Ministry for the Environment, “Our journey towards net zero New Zealand's second emissions reduction plan 2026-30 Tã Aotearoa mahere whakaheke tukunga tuarua” December 2024, https://environment.govt.nz/assets/publications/climate-change/ERP2/New-Zealands-second-emissions-reduction-plan-202630.pdf
