Barry Brill: Creative Accounting Trumps Climate Change – Again

New Zealand’s promise to halve CO2 emissions by 2035, is clever sleight-of-hand. The minister says it will cost us virtually nothing and we won’t need to increase the pace of tree-planting.

In An Absurd Ardern Ambition (2024), I noted that New Zealand’s first Nationally-Determined Commitment (NDC) (2021-30) under the Paris Agreement on Climate Change undertook to buy more that $30 billion worth of offshore credits. This was the largest “donation of taxpayers funds to a worthy cause” ever recorded.

In reaching for that record, the 2021 Cabinet consulted nobody and rode roughshod over the unanimous opposition of all its officials and advisers. It was a “captain’s call” to overshadow all others!

That article also pointed out:

“If Hon Nicola Willis does not deal with this issue in her 2024 Budget, it has the potential to wholly destroy her 2026 (election year) budget. As Associate Minister for Climate Change, she needs to announce a full review of the NDC as soon as the new members of the NZ Climate Commission are appointed.”

As accounting rules did not require the promise to appear in the Government’s books as a ‘contingent liability’ until 2026, the whole issue was ignored in last year’s Budget. And the Government steadfastly declined to discuss the problem throughout its first year in office.

Then, on 3 February 2025, the Climate Change Minister, Hon Simon Watts, announced that New Zealand’s Second NDC (2026-35) would not resile from the Arden promise to cut emissions by 50% from the 2005 base year. It would even up the ante slightly to a reduction of 51.5%.

By adopting this Second NDC, the government has replaced the 2026 budget blow-out with a promise that does not need to be fulfilled until 2035. As Simon Watts himself observes with considerable satisfaction “2035 is many years away”.

In a 180-degree turn from the Ardern Government’s position, the National Party has firmly dismissed the possibility of meeting its Second NDC by buying offshore carbon credits.

In a December RNZ interview, which pointed out that the latest figures showed New Zealand would be more than 90 million tonnes short of meeting its 2030 promise, Hon Todd McLay repeatedly told Morning Report that spending money overseas was off the cards:

"No we don't have to go and buy credits overseas to meet our obligations and we're working very hard to make sure we don’t. The idea of sending billions overseas is not palatable to anybody in New Zealand."

Removal of the offshore buying promise is also potentially significant in accounting terms.

A political promise to achieve a certain outcome far in the future cannot be costed unless we know how that outcome is to be achieved. If it is driven solely by prayers or good intentions or pious hopes, then it cannot be quantified in monetary terms and can never be accounted as a contingent liability.

Minister Watts reinforced the Government’s “moonbeams” position in his Platform interview with repeated assurance that the total economic cost of New Zealand’s Second NDC would be an insignificant 0.1% of GDP by 2035 – no more than $50 per household per year.

How’s that for an overnight step-down from a $30 billion monkey?

The overall NDC process is a perfect illustration of the sad fact that climate diplomacy is wholly driven by imaginative assumptions, creative accounting and a dense thicket of variable bureaucratic rules – all wholly divorced from any actual measurable temperature changes.

About 20 years late, it seems that our Cabinet now intends to play by the same game-theory rules that others have long understood. Why now? Because Christopher Luxon is sick of culture-war distractions in his first term and wasn’t going to tolerate another one based on climate change. He wants the national conversation to focus upon the great economic turnaround his Government aims to deliver over the next year or so.

The Second NDC has given the Government 10 years to do what its Labour predecessor promised to do in five years. Carbon intensity (ie CO2 per unit of GDP) tends to reduce year-by-year with the uptake of more energy-efficient technology such as hybrid cars, robo-taxis, an AI-driven grid, etc. The Climate Change Commission reckons this natural process alone could get us close to the 50% reduction between 2005 and 2035.

On the other hand, the Government is proud to support the construction of multiple billion-dollar AI data centres in West Auckland, all of which require constant 24/7 loads of reliable and affordable electricity.

The chances of New Zealand delivering its 2035 promise at trivial economic cost are not good. But so what?

It needs to be emphasised that almost everything about the Paris Agreement is voluntary. If it were mandatory it would be classified as a “Treaty”, and would therefore require approval by a two-thirds majority of the US Senate. As the agreement envisaged the payment of hundreds of billions of dollars in “climate reparations” to “developing countries”, nobody was interested in having a Treaty that did not include the USA.

In the absence of any legal consequences for breaching the Paris Agreement, the European Union has striven to create a political sanction. “Our people will refuse to buy your exports” has been the endless refrain along with intent to impose EU tariffs based on the ‘carbon content’ of imports. But the EU is now seen to be a toothless tiger as Net Zero policies have brought down the German government and there are real questions whether it will be politically possible for Europe to even meet its own Paris promises.

I suspect another major factor is that the Paris Agreement is looking very tattered after its second rejection by the USA and its wide unpopularity in Europe.

Carbon Brief reports that 95% of the 195 countries in the Paris Agreement have missed the 10 February 2025 deadline for publishing their Second NDCs.

Five of the 10 published NDCs (including USA) have been sharply criticised, leaving only five that are yet to be analysed: New Zealand, Santa Lucia, Andorra, Uruguay and Ecuador. In essence, New Zealand stands alone as the sole “developed” country to publish a valid Second NDC on time.

In modern times, “peak climate angst” was reached following Boris Johnson’s Glasgow COP in 2021 and it has all been downhill from there.

Barry Brill OBE JP LL.M(Hons) M.ComLaw is a former MP and Minister of Energy, Petrocorp director, and chair of the Gas Council, Power NZ, ESANZ, and EMCO. He is presently the Chairman of the New Zealand Climate Science Coalition.