Consistency in climate policy: Lessons from the UK and Denmark

Climate policy has an essential role in New Zealand’s long-term planning. As fiscal and environmental pressures intensify, maintaining policy consistency is becoming increasingly important. Consistency in environmental policy matters for effective climate action, and New Zealand can draw lessons from Denmark and the United Kingdom (UK).

The New Zealand Treasury’s 2025 Long-term Fiscal Statement notes climate as one of the main fiscal pressures, together with ageing and healthcare. From rising temperatures and melting glaciers to more frequent extreme weather events, the impacts of climate change are difficult to ignore. The report acknowledges that both adaptation to physical risks and mitigation through emissions reduction will play an important role in New Zealand’s economic future and, also, that how we respond today will have long-lasting consequences.

New Zealand has set a net-zero target and published a second Emissions Reduction Plan, as well as emissions reduction targets. While some progress has been made, the Climate Change Commission has pointed out that current policies are not keeping pace with what is needed to meet our future goals. Current policies are likely to meet the first emissions budget (2022–2025), but are not enough to align with the 2050 net-zero pathway.

New Zealand dropped seven places to 41st in the 2024 Climate Change Performance Index (CCPI) (an annual ranking system which evaluates the climate protection performance across (1) Greenhouse Gas Emissions, (2) Renewable Energy, (3) Energy Use, and (4) Climate Policy). The report states that New Zealand is going backwards on climate policy. Recent policy decisions, for example, pulling agriculture out of the Emissions Trading Scheme, have raised concerns among experts and environment organisations.

“Time inconsistency” is one of the core challenges of environmental policy; the costs come first, while the benefits, such as cleaner air or greater energy efficiency, often take years to appear, and can be uncertain in timing. 

Building renewable energy infrastructure, upgrading homes, or moving away from fossil fuels all take big upfront investments, which can compete with funding for other important priorities. The payoffs in cleaner air, lower energy bills, and stronger productivity, take time to eventuate.

This temporal misalignment makes climate action look like a cost rather than an investment. Governments risk deferring action to avoid immediate costs, even though such delays increase long-term fiscal and economic liabilities, as highlighted in the Long-term Fiscal Statement 2025.

Each year of inaction locks in polluting infrastructure (such as coal power plants, gas pipelines, and inefficient housing) and makes the clean-energy transition costlier in the future. The OECD points out that short-term bias is one of the main reasons countries underinvest in climate action.
 

Other countries are pressing ahead with consistent actions. Since 1990, the UK has cut emissions by 54 percent, while the economy has grown to twice its size. A substantial part of that decrease in emissions came from phasing out coal and investing in renewables.

During that time many were worried about the high cost of transition, but over the long-run the shift delivered cleaner energy, new industries such as offshore wind farms, and lower emissions.

In terms of the plan, the UK has reinforced its reputation for consistent environment policy through the rollout of the Environment Improvement Plan 2023 (EIP23), which builds directly and legally on the target set in the Environment Act 2021. This plan outlines ten specific goals, from clean air and thriving biodiversity to sustainable land use and is backed by a structured delivery mechanism. 

In 2024, total emissions in the UK transition fell by another 2.5 percent after the country closed its last coal-fired power station and expanded renewable energy capacity.

Denmark’s story is similar. Back in the 1980s and 1990s, it introduced tough energy taxes and made substantial investments in developing renewable energies. It was expensive and politically controversial.  Today, Denmark is among the most energy-efficient countries in the OECD, and it also has a thriving clean-tech industry led by global players such as Vestas.

Denmark also has some important lessons for New Zealand in terms of the agricultural sector. The Danish government has introduced a climate agreement to show how restoration and incentives can work together. The policy introduces a carbon tax on livestock, with lower rates for farmers who cut methane emissions by up to 40 percent.

The UK and Denmark show that when climate action is guided by consistent and long-term policy it can effectively support the transition. For New Zealand, this means shifting the conversation; consistency in environmental policy strengthens the credibility of climate commitments, reduces uncertainty, and keeps the transition on track.