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Legal advice from the Ministry of Foreign Affairs and Trade warned the government that its repeal of the ban on offshore oil and gas exploration opened New Zealand up to reputational and legal risks with its trading partners.
The Regulatory Impact Statement, sent to Resources Minister Shane Jones by the Ministry of Business, Innovation, and Employment, contains a series of assessments from MFAT regarding the reversal's potential impacts on New Zealand's Free Trade Agreements with the likes of the UK or the EU.
The unredacted document, first obtained by Newsroom, shows sections of legal and commercial privilege that were originally removed from the version released publicly by MBIE.
The government's commitment to reverse the 2018 ban passed its first reading in Parliament last week.
But the reversal risked "running counter to the Pacific regional and global consensus on transitioning away from fossil fuels", MFAT's advice said.
"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."
MFAT also warned the reversal "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."
While MFAT believed the risk of whether a trading partner would bring a legal challenge under their FTA was low, Greenpeace said continuing with the repeal was a "middle finger" to New Zealand's partners.
Greenpeace' Aotearoa's executive director Russel Norman said: "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."
MFAT also assessed the reversal of the ban was estimated to increase New Zealand's carbon emissions, and could be perceived as New Zealand not intending to meet its nationally determined contribution under the Paris Agreement, unless appropriate measures were taken to determine how the additional emissions would 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."
Jones doubted any legal challenges would arise.
"I don't think that the change that has been announced is going to lead to vigourous bouts of litigation with our trade partners because it's designed to, quite frankly, rescue our economy from pretty dire threats if we don't manage with a higher level of sophistication our energy transition," he said.
"We have to be conscious of our obligations and trade agreements, but one thing I genuinely believe is no trade agreement is ever signed compromising the ability of New Zealand to pass rules and effect regulatory outcomes that boost our own resilience or enhance our own wellbeing, and therein lies the balance."
Jones said countries New Zealand had FTAs with were already involved in oil and gas exploration, such as the UK, while New Zealand's largest trading partner China and prospective FTA partner India were heavily involved with coal.
Trade Minister Todd McClay told RNZ the government took its international obligations seriously, and the issue had not been raised with him by any of New Zealand's trading partners.
"New Zealand's trade agreements, including the UK and EU FTA's, include specific clauses that recognise New Zealand's (and our trading partners) right to pass law in the best interest of New Zealand - including environmental and energy policies," he said.