Willis Rejects Swarbrick Claim of $1.4b ETS Fiscal Hole
Finance Minister Nicola Willis has rejected Green Party co-leader Chlöe Swarbrick's claim that failed climate policies created a $1.4 billion hole in Emissions Trading Scheme auction revenue.
"The universal feedback was that this announcement had undermined market participants' confidence in the government's commitment to the NZ ETS."Climate Change Commission, April 2026
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Finance Minister Nicola Willis has rejected Green Party co-leader Chlöe Swarbrick's claim that failed climate policies created a $1.4 billion hole in Emissions Trading Scheme auction revenue.
The Greens argue the shortfall stems from repeated auction failures since the government took office. Swarbrick described the situation as a self-inflicted fiscal hole caused by policy uncertainty.
Willis countered that Treasury forecasts are professional judgements subject to revision. Actual outturns routinely differ from projections, she said. The minister noted that updates to ETS revenue forecasts will appear in the Budget Economic and Fiscal Update on 28 May 2026.
The $1.4 billion figure aggregates the volume effect from eight of the last ten carbon auctions that failed to clear. These cover the years ended 30 June 2024, 2025 and 2026.
AI illustration of a New Zealand industrial and forestry landscape — the two sides of the Emissions Trading Scheme, where factory emitters and forestry carbon credit suppliers interact in a market now under severe stress.
ETS Auction Mechanics
New Zealand's Emissions Trading Scheme requires emitters to surrender New Zealand Units for each tonne of CO2-equivalent emitted. The government auctions a capped volume quarterly with a price floor.
Since 2023 the scheme has seen repeated failures. All four auctions in 2023 cleared zero units. Two of four in 2024 partially cleared. All four in 2025 cleared zero units. Of 12 auctions across 2023–2025, ten saw no units sold.
ETS Auctions with No Units Sold, 2023–2025
Quarterly auctions that cleared zero units. 2024 partial clearances counted as not fully failed.
The November 2025 government announcement decoupled ETS unit limits and price controls from New Zealand's Paris Agreement Nationally Determined Contributions. The Climate Change Commission reported in April 2026 that this move undermined market participants' confidence.
The universal feedback was that this announcement had undermined market participants' confidence in the government's commitment to the NZ ETS. — Climate Change Commission, April 2026
Secondary market prices have traded 35–40% below the auction floor of NZ$68 in 2025, allowing emitters to buy cheaper units from forestry owners.
Fiscal Impact
Treasury's Financial Statements for the year ended 30 June 2025 attributed weaker-than-forecast other sovereign revenue partly to lower surrender volumes. Failed auctions mean lower cash proceeds than budgeted, increasing net core Crown debt.
Unsold units, including Cost Containment Reserve volumes, are permanently withdrawn from the market.
Willis emphasised that the ETS was never intended as a primary revenue tool. She contrasted the situation with Green Party spending proposals, which she said would require $88 billion more in tax and $44 billion additional borrowing.
Budget Outlook
The Budget on 28 May 2026 will embed revised ETS revenue assumptions. These updates will shape the OBEGAL track and debt-to-GDP trajectory. Net core Crown debt remains a key fiscal anchor under the government's self-imposed ceiling.
The episode underscores tensions between fiscal forecasting discipline and climate policy credibility ahead of the update.
