Context

Climate change presents a profound challenge for Aotearoa New Zealand, manifesting in more frequent extreme weather events, flooding, and rising sea levels. The Ministry for the Environment asserts that tackling this crisis requires collective action from governments, businesses, and individuals. Businesses, in particular, are pivotal in driving decarbonisation and investing in innovative technologies that accelerate the transition to a low-emissions economy. This guidance is intended for participants in voluntary carbon markets to set out government expectations and reflect international best practice for organisations undertaking voluntary climate mitigation in New Zealand. It replaces the interim guidance published in February 2022 and will be reviewed before the start of New Zealand’s second Nationally Determined Contribution (NDC2) period in 2031.

Compliance and voluntary carbon markets

This guidance applies to mitigation actions undertaken voluntarily, going beyond mandatory requirements such as those under the New Zealand Emissions Trading Scheme (NZ ETS). The document clarifies that surrendering New Zealand Units (NZUs) as part of a legal requirement is not considered voluntary mitigation, regardless of how the units were acquired. Consequently, organisations should not make claims of voluntary mitigation for NZUs surrendered to meet compliance obligations.

Best practice approach for voluntary climate change mitigation

Voluntary mitigation should play a complementary role in supporting the transition to a sustainable economy. Organisations are encouraged to follow a mitigation hierarchy that prioritises internal decarbonisation. The hierarchy involves four steps: identifying and reporting an emissions baseline; developing a credible decarbonisation plan aligned with the Paris Agreement and New Zealand’s climate targets; implementing that plan across operations; and finally, purchasing high-integrity carbon credits to address remaining emissions that cannot yet be eliminated. The report emphasises that voluntary carbon markets should not be a substitute for direct emissions reductions.

Principles for using carbon credits for voluntary mitigation

The guidance establishes six core principles for the use of carbon credits. First, credits must be “Additional”, meaning the underlying activity would not have occurred without the financial incentive provided by the credits. For example, business-as-usual management of forests established before 1990 is generally not considered additional. Second, outcomes must be “Durable and permanent”, with robust mechanisms to manage reversal risks, such as land covenants or replanting obligations. Third, mitigation must be “Real, measurable, and verifiable”, underpinned by third-party verification against reputable standards.

The fourth principle is “Transparent”, requiring organisations to clearly state the source of mitigation and how they align with the other principles. Fifth, actions must be “Respectful of rights”, ensuring social safeguards for Māori and local communities, including obtaining free, prior, and informed consent. Finally, credits must “Not be double counted”, meaning reductions are only counted once towards a target or obligation. This includes avoiding double use (the same unit used for multiple claims) and double issuance (multiple credits issued for the same activity).

Accurate claims and the Nationally Determined Contribution – avoiding double claiming

The document distinguishes between two types of claims: contribution claims and exclusive-use claims. “Contribution claims” represent voluntary actions that contribute to the host country’s NDC. Organisations must transparently disclose this contribution and specify the relevant jurisdiction. “Exclusive-use claims”, such as ‘carbon neutral’ or ‘net zero’, are typically associated with mitigation not counted towards an NDC. Currently, New Zealand’s NDC coverage in the land-use sector is limited to forestry, which comprises the majority of land-based removals. Mitigation in non-forest categories, such as riparian planting, may currently support exclusive-use claims as they are outside the NDC scope.

Claims of voluntary mitigation by cancelling NZUs

While the government recommends participating in voluntary markets directly, holders of NZUs can cancel units to support voluntary claims. However, this does not guarantee economy-wide additionality because the NZ ETS auction settings might respond to such cancellations. Only two types of NZUs are recommended for voluntary cancellation due to their permanence requirements: Entitlement for Permanent Forest Sink Initiative Forestry (NZU_PFSI) and Permanent p89 Forestry Removal Activities (NZU_PP89). Claims based on cancelled NZUs are considered contribution claims because the underlying removal activity is counted within New Zealand’s NDC.

Funding voluntary mitigation offshore

Organisations may choose to finance mitigation in other countries by purchasing international carbon credits. The report strongly recommends thorough due diligence to ensure these projects adhere to the six core principles. Engaging reputable providers is advised to verify that the offshore actions do not involve double counting and deliver genuine climate benefits.

Appendix: Case studies – voluntary climate mitigation claims

The appendix provides four illustrative case studies. Example 1 details permanent indigenous afforestation using cancelled NZUs as a contribution claim. Example 2 focuses on mixed exotic-indigenous forestry verified under a voluntary market standard. Example 3 explores agricultural methane mitigation technology, while Example 4 illustrates non-forest vegetation sequestration, which supports an exclusive-use claim because the activity is currently outside the scope of New Zealand’s NDC.