Robin Capper | CC BY 2.0 | Flickr
New Zealand: A Country Where Electricity Bills Override Climate Targets
New Zealand is a perfect example of the difficulty in meeting climate goals and energy-security targets simultaneously. In the short run, the country’s return to fossil fuels can indeed stabilize prices, decrease import dependency, and make New Zealand more attractive for investors. In the long run, however, greenhouse-gas emissions will increase, the green transition will stagnate, and the country’s leading role in climate-protection alliances will vanish.
In 2018, New Zealand became known as a front-runner in global climate policy. Jacinda Ardern’s government announced its plans to stop permitting new oil and natural gas exploration projects and to aim for carbon neutrality by 2050. The decision was both a political gesture and an economic experiment. The government assumed that the country’s potential for geothermal and hydroelectric energy would provide a solid foundation to transition away quickly from fossil fuels.
Ambitious but Fragile Promises
The country used powerful rhetoric to set an example for the entire world. Environmentalists celebrated its steps as a historic breakthrough, and the international media hailed the country as a “climate champion.” In 2019, the government further strengthened its commitments with the Zero Carbon Act: it set a target of achieving 100% renewable electricity generation by 2035 and net-zero emissions by 2050.
The figures were truly impressive. Eighty percent of electricity was generated from renewable resources, with hydro and geothermal energy providing a sound foundation. The share of wind energy steadily increased, while the public backed the programs to introduce electric cars and improve energy efficiency.
However, the model was fragile. The vulnerability of hydropower plants to the weather was a recurrent issue: during droughts, fossil-fuel use, coal imports, and prices all rose in tandem. After the Marsden Point oil refinery had shut down in 2022, the entire country became dependent on imported petrol and diesel. In primary energy consumption, the share of imported crude oil and oil products reached 40%. As the world energy market stalled and a demand-shock wave hit the country after the global pandemic, the nation faced a harsh truth: the cost of the green transition was higher than expected.
The price of electricity increased sixfold in many regions, companies suffered from declining competitiveness, and growing household expenses put pressure on policymakers. The green model, previously cited as a global example, quickly became a bone of contention in domestic politics.
Right-Wing U-Turn in Energy Policy
The right-wing coalition, winner of the 2023 elections, made it clear that they aimed to revitalize the fossil fuel industry. The government program of the National Party and NZ First was based on economic realities. In their campaign, they promised to decrease energy prices, restore industrial competitiveness, and guarantee supply security.
In July 2025, the Parliament voted 68 to 54 to lift the 2018 ban on oil and natural gas exploration. Energy Minister Simon Watts declared that relying on domestic extraction was the only way to mitigate import dependence and reduce the nation’s burdens. A prime example is the OceanaGold mining project that could generate billions of dollars. The new government introduced a fast-track approval system, announced a 200-million-dollar support package for new natural gas exploration projects, and permitted projects in previously protected natural areas. The political message was clear: New Zealand would not let climate policies reduce the economy’s room to maneuver.
Furthermore, the government left the Beyond Oil and Gas Alliance, which triggered a serious diplomatic backlash. Pacific Island neighbors were deeply concerned that Wellington’s U-turn would undermine the region’s collective climate-policy action.
According to the opposition and the Green Party, these actions are a major setback. They blame the government not only for abandoning the country’s climate commitments but also for losing the international prestige New Zealand had built up over the years. Protests involving tens of thousands of participants demonstrated that a significant part of the nation rejected the about-face on fossil fuels. However, energy prices and the economic difficulties put such great pressure on policymakers that the government could pass the required laws with a comfortable majority.
Security of Supply Versus Climate Policy
New Zealand is a perfect example of the difficulty in meeting climate goals and energy-security targets simultaneously. In the short run, the country’s return to fossil fuels can indeed stabilize prices, decrease import dependency, and make New Zealand more attractive for investors. In the long run, however, greenhouse-gas emissions will increase, the green transition will stagnate, and the country’s leading role in climate-protection alliances will vanish.
The official strategy still aims for net-zero emissions by 2050. It promises that by 2035, half of the total energy use will come from renewable sources. New mining and natural gas extraction projects, however, slow down the transition. The decision-makers engage in mixed messaging on the issue: while they speak about meeting climate protection goals, they strengthen the tools that obstruct or hamper efforts to reach them. Therefore, public debates focus not on whether the country believes in climate change, but on its willingness to pay for its climate commitments and make sacrifices in everyday life. It has become clear in recent years that a twofold—or sometimes even sixfold—increase in a family’s electricity bill can put green ambitions on the back burner.
There is also the international context. A growing number of countries in Europe and in North America now face the fact that the social costs of the green transition are higher than expected. Central European countries, including Hungary, are caught in similar dilemmas: they must guarantee supply security while moderating prices and meeting climate targets. New Zealand’s U-turn can raise a red flag for many.
Summary
New Zealand’s reversal in energy policy is both an economic necessity and a political admission. The green transition celebrated worldwide in 2018 proved rushed; system fragility and rising electricity prices have overshadowed climate targets. While the right-wing government justifies its actions with pragmatic, short-term economic arguments, the opposition and the environmentalists consider them a major setback. The country is now left to walk the line between two completely opposing options, as it can choose to secure a stable supply of energy with fossil fuels or to maintain a leading role in climate protection at great economic cost. At this stage, reality has come to dominate: it is electricity bills that dictate politics.
This post is a reprint of an article written by our colleagues, which was originally published on October 9, 2025, in the online economic newspaper Világgazdaság.
