A significant new report has found the Government’s support for gas exploration and its proposed funding of a liquefied natural gas (LNG) facility meet the definition of fossil fuel subsidies and are likely to breach New Zealand’s international trade agreements.
The report, A Credibility Gap: Assessment of New Zealand’s Fossil Fuel Subsidies and International Commitments, released by Lawyers for Climate Action, with legal review from Nura Taefi KC, shows that the Government’s $200 million co-investment fund for gas fields and its proposed funding for an LNG import facility meet internationally recognised definitions of fossil fuel subsidies, including under New Zealand’s free trade agreements (FTAs) with the UK and EU.
The report finds both measures meet the definition of a “fossil fuel subsidy” because they provide direct financial support for fossil fuel development and are likely to lower the cost of fossil fuels. Fossil fuel subsidies can misdirect investment and give fossil fuels an artificial advantage over cheaper, renewable energy.
It concludes the measures are likely to breach Article 22.8 of the New Zealand-UK FTA, which is in force and subject to dispute resolution, and are inconsistent with the Agreement on Climate Change, Trade and Sustainability (ACCTS), which New Zealand helped lead negotiations on and ratified in 2025.
Acting Executive Director of Lawyers for Climate Action NZ, Laura MacKay, says the report should ring alarm bells for the Government.
“This report makes clear that New Zealand is planning on introducing new fossil fuel subsidies that likely breach multiple international commitments. This creates risks for New Zealand’s exporters and our reputation with some of our most important trade partners.
"For years, New Zealand has been a leading advocate for the reduction and elimination of fossil fuel subsidies, including by convening the WTO Fossil Fuel Subsidy Reform Initiative, championing the ACCTS, and including novel provisions in our FTAs with the UK and EU on fossil fuel subsidies.
“It is concerning that New Zealand is now doing precisely the opposite of what it has been preaching internationally. This poses serious risks to New Zealand’s international credibility, including as a reliable trading partner.
“While we do not suggest that our trade partners are poised to file a complaint against New Zealand tomorrow, there are legal consequences to breaches of some of these agreements. It would be naive for New Zealand to assume that our trade partners aren’t watching, especially while New Zealand still claims international leadership on this issue.
“It doesn’t have to be this way. Final decisions still haven’t been taken on introducing these subsidies. The Government could decide instead to support other measures that would improve New Zealand’s energy security, without subsidising fossil fuels and placing New Zealand at risk of breaching these agreements.”
WWF-New Zealand, which sits on New Zealand’s Domestic Advisory Group for the NZ-UK FTA, says the report exposes a stark gap between rhetoric and reality - with New Zealand’s pursuit of fossil fuel subsidies flying in the face of the Government’s stated position as a leading advocate for the reduction and elimination of fossil fuel subsidies.
“You can’t publicly champion eliminating fossil fuels internationally while subsidising fossil fuels at home. It’s hypocrisy at the highest level”, says Caitlin Owers, WWF-New Zealand’s spokesperson.
“Our trade agreements were meant to drive stronger climate action, and New Zealand signed on in good faith. They can’t simply be cast aside when it’s inconvenient.
“This report is just further proof that this Government is taking us in totally the wrong direction by propping up sunset fossil fuel industries and increasing our dependence on volatile global fossil fuel markets.
“The current energy crisis has shown us exactly why we need to accelerate the transition to renewable energy. Instead, we’re doubling down on the problem and ignoring all the red flags. But luckily, there’s still time for the Government to change course.”
The report concludes the LNG levy and co-investment fund for oil and gas fields also undermine commitments under the NZ-EU FTA, the WTO Fossil Fuel Subsidy Reform Initiative (which New Zealand convenes), and the Coalition on Phasing Out Fossil Fuels Incentives Including Subsidies (COFFIS).
WWF-New Zealand and LCANZ have written to the Ministry of Foreign Affairs and Trade seeking urgent clarification on how these policies align with New Zealand’s international obligations and its stated advocacy to eliminate fossil fuel subsidies internationally.