Swarbrick said Treasury forecasts show the Government failed to receive the revenue it had expected from NZU auctions across the 2024, 2025 and 2026 financial years after eight of the last 10 quarterly auctions failed to clear, with only the March and December 2024 auctions selling any units.

“Nicola Willis and Christopher Luxon lecture New Zealanders about fiscal responsibility and the dangers of debt while actively tanking climate policy, costing us all at least $1.4 billion more in debt,” Swarbrick said.

“This fiscal hole is entirely self-inflicted, with carbon market leaders themselves being clear ETS auctions are failing because Luxon’s Government has consistently undermined confidence and certainty in its climate policies.”

The Greens said the $1.4 billion figure was made up of forecast revenue shortfalls of $618 million in 2024, $523 million in 2025, and $283 million in 2026, based on the number of units that failed to sell at auction rather than changes in carbon prices.

The party said lower auction revenue flowed directly through to higher net core Crown debt, citing a written parliamentary response from Finance Minister Nicola Willis stating failed auctions result in lower-than-forecast cash proceeds “with a corresponding impact on net core Crown debt”.

“It means more than a billion dollars the Government had banked on to balance their budgets have not arrived in the last two years,” Swarbrick said.

"Our questions to Willis’ office shows she knows this means the Government is taking on more than a billion dollars additional debt as a result."

Responding to the Green Party’s claims, Finance Minister Nicola Willis rejected suggestions the failed auctions had created a fiscal hole and said Treasury revenue forecasts were routinely updated.

“There is no fiscal hole. Treasury forecasts ETS auction proceeds as it forecasts a whole lot of other things, according to its best professional judgement,” Willis told Carbon News.

The minister said it was too early to draw conclusions ahead of updated Treasury forecasts being released with this week’s Budget.

“Actual outturns usually differ and forecasts get revised. Updates to these forecasts will be published with the Budget on Thursday so Ms Swarbrick’s comments are premature,” she said.

“There would be a fiscal hole in New Zealander’s back pockets if they had to pay $88 billion more in tax and borrow $44 billion to pay for the Greens’ spending promises.”

However Swarbrick said the Government was squarely to blame for weakening climate policy settings and damaging confidence in the ETS after taking office.

“Luxon’s Government shredded climate policy when they came to office, telling us all to not worry about it, because the market would sort it out. Then they broke the market. Now they’ve quietly borrowed more than a billion dollars to cover their tracks.”

The Greens pointed to comments from carbon market analysts who have linked the repeated auction failures to declining confidence in the Government’s climate policy direction, with unlinking the ETS from the country's NDC late last year the latest serious hit to market confidence.

It's important to note that the ETS is supposed to be a tool to reduce emissions rather than a revenue gathering tool. It could also be argued that the auctions failing is actually a sign that the market is working, as there is enough supply so the auction units aren't needed.

But continual auction failures and the price lagging well below the auction floor – at a point too low to incentivise industrial emissions reductions – doesn't signal a healthy market, or that the ETS is the robust "key tool" to drive emissions reductions that the Government has repeatedly claimed.