The OECD is warning New Zealand that relying on tree planting and carbon credits to slash emissions may not hold water internationally much longer.
The organisation of wealthy countries today released its survey of New Zealand.
The OECD said it was not certain what the future international rules for forestry would be, and that carbon markets have lost credibility offshore.
New Zealand is especially reliant on carbon markets - it has to purchase two thirds of its savings offshore, essentially paying other countries to make cuts on our behalf to meet our pledge to halve net emissions by 2030.
Meanwhile, the OECD said the price of carbon in the domestic market - currently nearly $70 a tonne - was too low.
The Climate Change Commission estimated the price would have to double by 2030, and reach $250 a tonne by 2050.
The OECD noted New Zealand's emissions were among the highest per-capita in the world, and said large cuts in the agriculture and transport sectors - responsible for large shares of emissions - were needed to meet our commitments.
It said New Zealand has low fuel taxes compared to most in the OECD, and suggested adding environmental levies and introducing congestion charging.
The OECD said New Zealand was taking action to improve water quality which has been degraded by the "huge expansion" of the dairy industry, as well as inadequate urban water infrastructure.
It said emissions from agriculture - mainly methane - made up almost half of total emissions, a much higher share than the OECD average.
"They have grown by 17 percent since 1990, driven by increased use of synthetic nitrogen fertiliser and higher dairy cattle numbers."
OECD warns about getting ahead of ETS, cites NZ Battery project
The OECD said the emissions trading scheme - where the rising cost of carbon drives innovative ways for industry to cut climate gases - was the country's most important instrument to slash outputs.
It said it covers 96 percent of non-agricultural GDP (agriculture is currently excluded).
The organisation warned against imposing expensive cuts to emissions when it could be cheaper in some situations to let market forces do the work via the emissions trading scheme.
For example, it said caution was needed for the government's proposed $4 billion NZ Battery project, which will see water pumped and stored so it can be used to generate renewable electricity during dry periods.
Currently, coal powered generation is fired up to meet demand when needed.
The OECD said the project could perversely incentivise electricity generators not to invest in other renewable energy projects, which could distort the carbon market.
However, as the OECD notes, and many observers agree, cuts outside of the ETS are needed to reduce the total amount of climate gases released, and to hit targets within the agreed timeframes.
Architecture in place, now actual reductions needed
The OECD said while the government has improved the legal framework for reducing greenhouse gas emissions, it needed to actually start cutting emissions.
It cited work done in urban development, building codes, and progress on expanding public transport, walking and cycling.
The government is set to release its substantial plan for cutting greenhouse gas emissions in May.
