The Government is being accused of "wholesale climate fraud" in a new report which claims New Zealand bought worthless carbon credits from Ukraine and Russia.
The Morgan Foundation released its Climate Cheats report today, and Climate Change Issues Minister Paula Bennett says while she hasn't seen it yet, the Government is already reviewing the Emissions Trading Scheme (ETS).
Report author, economist Geoff Simmons, says New Zealand has been the largest buyer of the Ukrainian and Russian credits through the ETS.
Almost all of those credits are "hot air" and don't represent true emissions reductions, but the Government will use them to claim it is meeting international obligations through to at least 2020. Actual emissions will continue to grow beyond the country's targets.
Credits from Ukraine and Russia were banned by the EU in 2011 because of links to organised crime and concern over their environmental integrity.
The ETS is the world's biggest programme for trading greenhouse gas emissions allowances. It puts a price on greenhouse gases to provide an incentive to those in the scheme to reduce their emissions.
Mr Simmons says it has the potential to damage New Zealand's clean-green reputation and as a corruption-free country.
In a statement, Ms Bennett says she hasn't seen the report so doesn't know if there was "anything new" in it, but is aware of previous claims the Morgan Foundation has made about international units.
"New Zealand made the best decision based on the rules at the time. Kyoto has been replaced by the newer and better Paris Agreement," says Ms Bennett.
"The ETS isn't perfect, which is why we're reviewing it. I absolutely stand by its ability to help us transition to a lower-carbon economy, and international markets have a role to play in that."
The report claims New Zealand put around $200 million "into the hands of foreign criminals" to avoid its obligation to reduce emissions.
Companies issued with the credits by the New Zealand Government were also able to use the cheap, fake credits and profit from their pollution.
While Mr Simmons says carbon trading is a good way to make reducing emissions easier, it only works if the credits bought have value.
"The sad truth is that the foreign credits New Zealand has gorged on up until now have produced little to no climate benefit," the report says.
The report authors say New Zealand should three things to "put it right":
The Green Party also wants the Government to stop using the credits.
"The climate can't be cheated into not changing," says co-leader James Shaw.
"We're not going to stop climate change with governments like ours cashing in dodgy foreign units. We'll only stop climate change if governments like ours actually reduce climate pollution at home."
He says it is "deeply embarrassing" New Zealand is the biggest user of the credits, and warns if New Zealand doesn't cancel them it risks "losing the moral authority" on climate change.
Ms Bennett is heading to New York this week to sign the Paris Agreement, which was reached in December last year.