Green Party co-leader Chlöe Swarbrick.
Photo: RNZ / Mark Papalii
The Green Party is claiming the government’s “failed climate policies” have created a $1.4 billion fiscal hole, but the Finance Minister rejects that, saying there is “no fiscal hole” and “actual outturns usually differ and forecasts get revised”.
Green Party co-leader Chlöe Swarbrick says Emissions Trading Scheme auctions are failing because the government has “consistently undermined confidence and certainty in its climate policies”.
The party is pointing to Treasury’s financial statements showing eight of the last 10 carbon auctions have failed to clear since the government took office, and the $1.4b is the sum of the volume effect across the years ended 30 June 2024, 2025 and 2026.
Swarbrick had asked Nicola Willis in a written parliamentary question what the revenue impact of the five latest failed ETS auctions were, to which Willis responded saying the sale of units didn’t have an impact on revenue, but acknowledged an impact on debt.
“The Crown receives cash proceeds from the sale of ETS units.
“When auctions are forecast to clear and subsequently fail to, this results in lower than forecast cash proceeds with a corresponding impact on net core Crown debt,” Willis said.
Ahead of the Budget being released on Thursday, Swarbrick was calling out the government for lecturing New Zealanders about fiscal responsibility and the dangers of debt while “actively tanking climate policy”, costing the country $1.4b more in debt.
The party said the $1.4b is the cash the government forecast it would receive but lost because those auctions failed, across the financial years ending June 2024, 2025 and 2026.
“This fiscal hole is entirely self-inflicted, with carbon market leaders themselves being clear ETS auctions are failing because Luxon’s government has consistently undermined confidence and certainty in its climate policies.”
She said the more than billion dollars the government had banked on to balance its budget had not arrived in the last two years. She pointed to her question to Willis’ office, saying it showed she knew this meant the government was taking on more than a billion dollars additional debt as a result.
“Luxon’s government shredded climate policy when they came to office, telling us all to not worry about it, because the market would sort it out. Then they broke the market. Now they’ve quietly borrowed more than a billion dollars to cover their tracks.
“Can we finally stop letting the National Party pretend they’re ‘good economic managers’?” Swarbrick said.
In response, Willis told RNZ there was no fiscal hole. She said Treasury forecasts ETS auction proceeds as it forecasts a “whole lot of other things, according to its best professional judgement”.
“Actual outturns usually differ and forecasts get revised,” she said.
Willis said updates to those forecasts would be published with the Budget on Thursday, “so Ms Swarbrick’s comments are premature”.
“There would be fiscal hole in New Zealander’s back pockets if they had to pay $88 billion more in tax and borrow $44 billion to pay for the Greens’ spending promises.”
Finance Minister Nicola Willis.
Photo: RNZ / Mark Papalii
Not a new problem
RNZ reported on the first failed auctions in March 2023, where it explained how the government lost hundreds of millions of dollars in revenue from big polluters.
Companies have four chances a year to buy what they need from the government, that is auctions of something alled NZUs – New Zealand Units, or, in colloquial terms, licences to produce a tonne of carbon dioxide emissions.
The idea is that paying for emissions gives companies an incentive to lower their climate pollution (and consumers an incentive to buy cleaner products), as well as being a tidy money spinner for the taxpayer.
Many companies, including petrol companies, have to buy these every year to cover their planet-heating emissions under the Emissions Trading Scheme (ETS).
Throughout 2023 though, not one tonne of carbon was sold.
It’s not that companies had stopped polluting the atmosphere with their heating emissions. In short, the reason companies don’t want to buy these from the government is that they can buy their NZUs cheaper elsewhere.
The issue carried on into 2025, where not a single bidder registered for the final ETS auction of the year – the second calendar year in which all four quarterly ETS auctions had failed.
The managing director of commodities broker Marex, Nigel Brunel said recent climate policy announcements were “primarily responsible” as they signalled that the government was backtracking on climate change.
Emitters captured within the ETS still have to pay for their greenhouse gas emissions – but at the moment it is significantly cheaper to buy carbon units from elsewhere, such as forestry owners.
The minimum price carbon units could be sold for in the auction was $68, but emitters have been able to buy units elsewhere for as little as $40 recently.
Brunel said the market had been spooked by the government’s decision in November 2025 to ‘de-couple’ the ETS from New Zealand’s Paris Agreement pledges.
“They could have done it quite differently, instead of just going, ‘Surprise!'”
Markets “hate uncertainty”, he said.
This was backed up by a Climate Change Commission report from April this year that noted its engagement discussions about the ETs were “dominated” by the aftermath of the government’s November 2025 announcement about removing the nationally determined contributions – under the Paris agreement – requirement from the ETS settings.
“The universal feedback was that this announcement had undermined market participants’ confidence in the government’s commitment to the NZ ETS,” the report stated.
“Many commented that the market reaction was caused not just by the NDC announcement itself, but the way it came after a series of earlier decisions perceived as weakening other aspects of climate policy.”
The report also noted the commission had previously advised that meeting emissions targets was likely to require a strengthened NZ ETS as well as targeted policies in other sectors such as transport, energy and agriculture.
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