Abstract
With the world passing 1.5°C of warming in 2024 and current policies putting the world on track to reach 2.8°C by 2100, it is critical to consider all possible tools for climate action.The voluntary carbon market (VCM) is one such tool, capable of financing decarbonisation projects to support a low-carbon transition. This research investigates the current and potential role of the VCM in New Zealand. Using the multi-level perspective (MLP), the study examines how the VCM is being held back or enabled through investigating interactions across niche-level supply-side innovations, regime-level markets and other structures, and landscape-level international and societal pressures. A multidisciplinary approach drawing on perspectives from geography, economics, and social science was used to explore VCM dynamics. Data from interviews and a survey of carbon market brokers, potential suppliers, and demand-side participants revealed five principal themes shaping the New Zealand VCM: government involvement, market integrity and barriers to entry, market innovation through supply and demand, accounting practices, and price and investment dynamics.
The study’s findings indicate the New Zealand VCM is underdeveloped and is constrained by fragmented governance and standards, verification costs and inconsistent accounting. Demand exists for a credible national VCM, with businesses willing to pay between NZ$25 and NZ$150 per tCO2e, yet supply is currently limited. However, potential projects exist, including native forestry, soil carbon sequestration, blue carbon restoration, energy efficiency, and smaller-scale community mitigation initiatives, demonstrating niche-level innovation capable of scaling if supported by robust institutional frameworks. Participants show a preference for contribution claims over carbon neutral claims to ensure alignment with New Zealand climate commitments.
Applying the MLP highlights that while niche innovation and demand exist, regime- level conditions constrain market growth. Strengthened governance, clear standards and coordinated policy are essential to unlock investment, enhance integrity, and facilitate market expansion. By addressing knowledge gaps related to VCM dynamics and multi-level interactions, this research makes theoretical contributions to market-based climate governance and provides applied, evidence-based guidance as to how to build a credible, high-integrity VCM that can complement New Zealand’s transition to a low-carbon economy.