Labour Climate Policy — Restore the ETS, Clean Cars and Green Investment

The Policy: Labour Climate Change Policy →

In opposition since October 2023, Labour has positioned itself as the party that will rebuild New Zealand's climate architecture after what it describes as systematic dismantling by the National-led coalition. Labour's platform draws heavily on what it built in government: a ring-fenced Climate Emergency Response Fund (CERF) seeded with ETS revenue, a Clean Car Discount that subsidised EV purchases, a $1 billion commitment to the NZ Green Investment Finance fund, and plans to bring agriculture into emissions pricing by 2025. Labour's climate spokesperson, Dr Deborah Russell, has repeatedly argued that the current government relies too heavily on market-based ETS pricing alone — which she says would require carbon prices of at least $180 per tonne to do the work needed, pushing fuel costs up by roughly 40 cents per litre — without complementary direct-action programmes.

The National-led coalition took a different path from day one. It ended the Clean Car Discount on 31 December 2023, closed the CERF in May 2024, shut the GIDI (Government Investment in Decarbonising Industry) Fund to new applicants, wound back the Clean Car Standard, reversed the offshore oil and gas exploration ban, and delayed agricultural emissions pricing from 2025 to at least 2030. A June 2026 Treasury analysis revealed the cumulative cost of meeting New Zealand's 2030 Paris Agreement pledge could reach $5 billion in offshore carbon credit purchases — a figure Prime Minister Christopher Luxon has said the government will not pay.

What Labour's platform includes:

• ETS reform: Commit to reforming the NZ Emissions Trading Scheme in line with Climate Commission recommendations, moving beyond a "least-cost, net-based" approach that relies on forestry offsets, and restoring the ring-fenced Climate Emergency Response Fund funded by ETS auction revenue
• Clean Car Discount restoration: Reinstate the feebate scheme that provided up to $7,500 rebates for zero-emission vehicles and charged fees on high-emission imports; Labour estimated its removal added 3 million extra tonnes of emissions over the budget period
• $1 billion Green Investment Fund: Labour committed an additional $300 million to NZ Green Investment Finance, bringing total commitment to $1 billion to support businesses and technologies cutting greenhouse gas emissions; it also pledged to restore the GIDI Fund, whose discontinuation is estimated to cost 4.3 million tonnes of CO2e in abatement by 2030
• Home electrification: $4,000 solar rebate to double the number of homes with rooftop panels; $3,000 rebate for households switching off gas appliances; coal boiler removal from all schools and hospitals within two years; diesel generator removal from schools
• Agriculture: All farms measuring and managing emissions by 2025 (under Labour's plan); reward on-farm sequestration by adding riparian planting, wetlands and other vegetation types into the ETS — though Hipkins confirmed in 2026 that farm emissions pricing policy is "under review"
• Just Transition: Create a dedicated minister for Just Transitions to support communities facing climate-driven economic change

Where things stand:

Labour has been a consistent critic of the coalition's emissions reduction plans. When the government released its draft Second Emissions Reduction Plan in July 2024, Labour leader Chris Hipkins warned that "almost every decision...has turned us backwards" and that the plan's positives were "outweighed by the negatives." Modelling showed the policy reversals collectively added millions of extra tonnes of projected emissions: the removal of EV subsidies alone accounts for 1.4 million extra tonnes over 2026–2030; the GIDI fund closure adds 4.3 million; delaying farm emissions pricing adds 1.9 million; weakened vehicle standards add 1 million through 2035.

The ETS itself has been in trouble under the current government. Seven consecutive auctions failed between March 2023 and the end of 2025, with both 2025 auctions finding zero bidders. Carbon prices have sat around $50–60 per tonne on the secondary market, well below the $68 floor price at government auctions and far below the $180 Labour says the market would need to reach to substitute for all the removed complementary policies. Treasury's June 2026 Budget Economic and Fiscal Update confirmed New Zealand faces up to a $5 billion liability in offshore carbon credit purchases to meet its 2030 Paris Agreement target, with an additional $1.6 billion for the 2035 commitment. Hipkins called on the government to take responsibility rather than "shrug their shoulders."

Labour has not yet released a full 2026 election climate manifesto — Hipkins confirmed in May 2026 that the party was holding major policy announcements until after the government's Budget. However, the broad outlines are clear: restore the institutional architecture of the Zero Carbon Act, reinstate direct-action programmes the coalition removed, and invest in renewable energy as a path to lower power bills and export competitiveness.

What to watch:

• Labour's full 2026 election climate manifesto, expected mid-year after the government Budget
• Whether Labour confirms or abandons its farm emissions pricing commitment in the 2026 platform
• Results of remaining 2026 ETS auctions and whether carbon prices recover above the floor
• Any cross-party negotiations on climate targets following Treasury's $5 billion liability revelation