New Zealand and international cooperation for emissions reductions and removals

The Paris Agreement is the global agreement on climate change adopted by the 21st Conference of the Parties  to the United Nations Framework Convention on Climate Change (UNFCCC). It now has more than 190 Parties. The mitigation goal of the agreement is to keep the global average temperature rise well below 2° C above pre-industrial levels, while pursuing efforts to limit the temperature increase to 1.5° C.

Each signatory to the Paris Agreement has a Nationally Determined Contribution (NDC). This is  meant to reflect a country’s highest possible ambition to contribute to the global response to climate change. 

The Paris Agreement also recognises that countries may cooperate internationally to:

• allow for a higher ambition
• promote sustainable development and environmental integrity. 

Article 6 of the Paris Agreement sets basic parameters for Parties to cooperate to reduce emissions. 

It puts clear responsibilities on participating countries to ensure that any trade of emissions reductions for their NDC targets:

• has environmental integrity
• supports sustainable development
• is transparent
• is authorised and accounted for by the countries involved.

Countries have also agreed on detailed guidance to meet these responsibilities including how they will be reported publicly and reviewed.

For more information see Cooperative implementation [United Nations Climate Change website].

The Paris Agreement and guidance on cooperative implementation seek to ensure that all internationally transferred emissions reductions and removals are legitimate by establishing the principles that they should be real, additional, permanent and are not double counted. Any emissions reductions used towards NDCs should be traceable to ensure transparency.

Article 6 and its guidance:

• set out rules for robust accounting, ensuring environmental integrity, reporting and review
• set up a centralised (UNFCCC administered) voluntary mechanism Parties can use for cooperation
• provide for a work programme on non-market approaches to cooperation on mitigation.

For more on New Zealand and the Paris Agreement see the Ministry of Foreign Affairs and Trade website. 

New Zealand’s NDC – a 50 per cent reduction of net emissions below our gross 2005 level by 2030 – was set on the basis that it would be achieved through a mix of:

• domestic emission reductions
• forestry removals
• international cooperation for mitigation.

Read more about New Zealand’s 2021-2030 NDC (updated in 2021). 

While New Zealand’s priority is to reduce emissions at home, domestic emissions reductions alone will not enable Aotearoa to meet its NDC target. That is why cooperation to reduce emissions in other countries is part of the mix of options for meeting the NDC.

The Climate Change Commission’s advice on the Government’s first three emissions budgets assessed that meeting New Zealand’s NDC through domestic action alone would be unmanageable. The Commission notes that any combination of actions to deliver so much mitigation in so short a time would require large-scale cuts to economic output across Aotearoa. This would lead to a legacy impact on the quality of life for younger generations. 

There is some uncertainty around how much domestic action we might be able to achieve towards the NDC. New Zealand’s first emissions reduction plan indicates that roughly one-third of the mitigation needed to meet New Zealand’s first NDC will come from domestic action. The remaining two-thirds need to be met through offshore mitigation – even in the most ambitious scenario for domestic action.

Ngā Kōrero Āhuarangi Me Te Ōhanga: Climate Economic and Fiscal Assessment 2023, jointly produced with the Treasury, brings together information on the economic and fiscal implications of climate change and New Zealand’s response to it.

The Framework for International Carbon Market Cooperation that was adopted in 2019 [PDF 473 KB] outlines how the Government would approach cooperating with potential overseas partner.

It includes six principles:

• Offshore supply is of high quality – units are genuine and of high environmental integrity
• Our approach is in partnership with Māori as per Te Tiriti o Waitangi
• Our cooperation supports both partners’ transition to a low-emissions, climate-resilient economy
• Our cooperation aligns with New Zealand’s wider political and economic relationships with partners
• Our cooperation is transparent and proportionate
• Our cooperation is consistent with the Climate Change Response Amendment Bill.

The Government is currently exploring a range of potential options for sourcing international emission reductions with environmental integrity including:

• Direct investment in partnership with countries, including in the Asia-Pacific region in ways that promote sustainable development outcomes and resilience. Cooperation with developing countries could help them decarbonise, reduce emissions, and catalyse further green investment. It would not only have benefits for the climate, but has the potential to create healthier, more sustainable, and cleaner environments for communities. 
• Investing in carbon funds through multilateral development banks or other global initiatives. Through pooled financing with other buyer countries we have the potential to invest in larger scale emission reductions projects.
• Contributing to the development of the UN centralised mechanism under Article 6.4 which participants may choose to use to undertake   activities that generate emission reductions and issue units. This is not yet operational.
• Linking the New Zealand NZ ETS to international markets with environmental integrity. ETS linking would be considered as a ‘backstop’ option if other international cooperation options are not sufficient. If the NZ ETS opened to international markets, only Government-approved international units would be eligible and would be subject to a volume limit in accordance with the Climate Change Response Act 2002. The Government has not taken any decisions on ETS linking and it is only one of a range of options being considered. 

The cost of international cooperation for mitigation  to meet New Zealand’s NDC also remains uncertain as many options are at early stages or yet to be developed.

Many factors could affect the cost of offshore mitigation such as the:

• nature of the emissions reductions activities we cooperate on 
• how risks are allocated amongst participants
• international economic condition
• the timing of purchases and our domestic emission reductions. 

According to the Climate Economic and Fiscal Assessment (CEFA) report, released in April 2023, the cost of offshore mitigation to 2030 could range from:

• $3.3 billion to $4.2 billion if purchases align with the projected carbon price trajectory in emerging and developing economies, or 
• $18.3 billion to $23.7 billion if purchases align with the projected carbon price trajectory in advanced economies, or
• $7.7 billion to $9.9 billion if purchases align with a projection based on current prices in selected markets.  (In the CEFA price scenarios, the emerging and developing economies included are China, India, Indonesia, Brazil and South Africa. Advanced economies are all OECD countries except Mexico. Selected markets are the EU, South Korea, UK, and California-Quebec ETS’. See the CEFA for details.)

To be effective, international carbon markets must have environmental integrity. New Zealand has a history of championing environmental integrity, and along with other countries we have made public commitments to set a high standard:

• At the Paris climate change negotiations (COP 21, 2015), New Zealand led a Ministerial Declaration on Carbon Markets that was endorsed by 21 countries. The declaration sent a clear signal that cooperation through international carbon markets has an important role in allowing for higher ambition by Parties to the Paris Agreement.
• At the Madrid climate change negotiations (COP25, 2019) New Zealand was part of a group of 31 countries that endorsed the San Jose Principles for High Ambition and Integrity in International Carbon Markets [DCC website]. 

New Zealand worked with other signatory countries to develop ideas on standards and guidelines for environmental integrity. These were shared as part of New Zealand’s contribution to Article 6 negotiations – see: Towards standards and guidelines on environmental integrity in international carbon markets.

The UN climate change conferences in Glasgow (2021) and Sharm-El-Sheikh (2022) agreed international guidance for this cooperation. The guidance gives us a framework to select, implement and report on actions that demonstrate environmental integrity and meet these commitments. 

For more information on New Zealand’s approach to international climate change negotiations and our support for climate change action in developing countries see Climate change [New Zealand Foreign Affairs and Trade website] 

Have your say

As work on international cooperation progresses, we’re keen to hear from New Zealanders. 

For further information or to submit feedback on the International Cooperation for Mitigation work contact ICM@mfe.govt.nz.