Trade – Luxon risks EU Free Trade Agreement with renewed oil and gas exploration – Greenpeace

Ministry of Foreign Affairs and Trade advice to the Luxon Government confirms that the attempt to restart offshore oil and gas exploration is likely to breach the Free Trade Agreement between New Zealand and the European Union.

As a result, the EU could take action against New Zealand under the FTA, leading to the loss of tariff-free access to the biggest single market in the world. MFAT states that the FTA is already saving exporters over $100m per year in tariffs, and could increase exports by up to $ 1.8 billion per year by 2035.

“MFAT has confirmed that Luxon’s attempt to restart oil and gas exploration is a breach of the environment chapter of the recently agreed free trade agreement between New Zealand and the European Union,” says Dr Russel Norman, Greenpeace Aotearoa Executive Director.

“The Government tried to hide this fact by redacting the advice from the Regulatory Impact Statement published on its website, but the unredacted version has found its way into the public domain.

“The Luxon Government only ratified the EUNZFTA in May this year. That FTA has an environment chapter that commits New Zealand not to reduce environmental protections and to meet its Paris climate targets. Furthermore, New Zealand committed to transition away from fossil fuels as part of the United Nations’ COP28 and the Pacific Islands Forum in 2023.

“Luxon is recklessly charging ahead, giving the middle finger to the European Union, the Pacific and anyone who cares about climate change. He seems to be hoping that Trump will win the US election so he has someone to talk to at international meetings.

“Climate action requires people and Governments all over the world to act together in good faith to cut emissions. When the New Zealand Government signs up to international agreements to cut emissions, and embeds these commitments in free trade agreements, other Governments expect New Zealand to honour these commitments.

“And there is very little likelihood that any oil companies will restart offshore oil and gas exploration because of civil society opposition, poor prospects and reducing domestic demand for gas. And even if they restart looking, there won’t be any new gas for at least a decade. It is farcical.

“Christopher Luxon is behaving like the Donald Trump of the South Pacific with his wreckless climate denialism.

Option 2 [repealing the offshore oil and gas exploration ban] carries risks to New Zealand’s international reputation and relationships

85. The Ministry of Foreign Affairs and Trade (MFAT) has assessed that reversing the 2018 ban and promoting new petroleum exploration risks being seen as running counter to the Pacific regional and global consensus on transitioning away from fossil fuels. A key pillar of the COP28 outcome was countries agreeing to contribute to a global transition away from fossil fuels. This drew heavily from the outcome of the 2023 Pacific Islands Forum Leaders meeting where leaders committed to “transition away from coal, oil and gas in our energy systems in line with IPCC pathways… with a peak in fossil fuel consumption in the near term.”

86. The preferred option poses relationship and reputational risks. There are risks to New Zealand’s relationships with its global and Pacific Island partners around the perception of a policy departure on the transition and our climate change goals.

Option 2 carries legal risks arising from New Zealand’s international obligations

87. MFAT assessed that reversing the 2018 ban would likely be inconsistent with the obligations in several of New Zealand’s free trade agreements (FTA) not to reduce environmental protections for the purposes of encouraging trade or investment. These obligations prevent parties from reducing environmental protections to advantage domestic businesses (giving them an unfair advantage in export markets) or attract investment away from countries with higher environmental protections. MFAT considers it is hard to assess the likelihood of a trading partner bringing a legal challenge under an FTA but, on balance, expects the risk of legal challenge is likely to be low.

88. MFAT has assessed that reversing the 2018 ban, which is estimated to increased New Zealand’s carbon emissions, could be perceived as New Zealand not intending to meet its nationally determined contribution under the Paris Agreement unless appropriate measures are taken to demonstrate how the additional emissions will be offset. This gives rise to international legal risk. There have been attempts globally to take novel cases against States under international law, for breach of their climate change obligations. While these legal risks are low at this time, as is the risk of challenge, this is an active area of international litigation.