Budget Policy Statement

Climate Emergency Response Fund

At Budget 2022 the Government established the Climate Emergency Response Fund (CERF) as a permanent feature of the annual Budget process to support our climate change objectives. The CERF is an enduring, multi-year fund that was set up based on the cash proceeds from the New Zealand Emissions Trading Scheme (NZ ETS). The CERF is able to support either operating or capital expenditure as required, and helps enable the Government to effectively manage the pipeline of investments we need for the climate transition.

To date the CERF has supported $3.8 billion in climate-related spending, including a $2.9 billion package at Budget 2022 to support the Government's first Emissions Reduction Plan. For Budget 2023 we have refreshed the criteria to include climate change adaptation as well as mitigation. An initiative is eligible to seek funding from the CERF if it:

1. is included in an Emissions Reduction Plan or directly supports emissions reductions (domestically or internationally)
2. is included in a National Adaptation Plan or directly reduces vulnerability or exposure to the impacts of climate change
3. supports a te ao Māori approach to the climate response
4. addresses the distributional impacts of climate change or the climate policy response, and/or
5. supports the development of any initiatives meeting these criteria in the future.

The balance of the CERF is updated regularly at Economic and Fiscal Updates to reflect changes to the four-year forecasts of NZ ETS cash proceeds. In HYEFU 2022 the CERF has been topped up by $2.1 billion, which reflects the addition of forecast NZ ETS cash proceeds from the 2026/27 financial year and updated forecasts of NZ ETS cash proceeds between 2022/23 and 2025/26. This brings the current balance of the CERF to $3.6 billion. At the time of finalising the forecasts the Government was due to consider updates to price and unit supply settings for the NZ ETS, which could affect forecasts of NZ ETS cash proceeds. The balance of the CERF may be adjusted in the future to reflect these decisions.

Table 2 - Climate Emergency Response Fund

Source: The Treasury